Pacific Biosciences of California, Inc. (PACB Quick QuotePACB - Free Report) , popularly known as PacBio, is well-poised for growth in the coming quarters, courtesy of its slew of strategic deals over the past few months. A robust second-quarter 2022 performance, along with strength in its Sequel system, is expected to contribute further. However, stiff competition and production bottlenecks persist.

Over the past year, this Zacks Rank #3 (Hold) stock has lost 78.6% compared with the 34.5% decline of the industry and 13.6% fall of the S&P 500.

The renowned global provider of sequencing systems has a market capitalization of $1.31 billion. The company projects 6.6% growth for 2023 and expects to maintain a strong performance. PacBio’s projected sales growth of 8.4% is favorable to the industry’s 5.9%.

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Let’s delve deeper.

Strategic Deals: We are optimistic about PacBio’s robust growth opportunities via its inking of a slew of strategic deals over the past few months. The company, in May, announced a collaboration with genome analysis company iLAC, Inc. and Robotic Biology Institute, Inc. to develop fully automated end-to-end workflows for PacBio’s Sequel II and Sequel IIe HiFi long-read sequencing systems by employing advanced robotics.

In April, PacBio announced an expanded research collaboration with Children’s Mercy Kansas City to use the multi-omics capabilities of the company’s Sequel IIe system in the study of genetic disease.

Strength in Sequel System: We are optimistic about PacBio's flagship platform, the Sequel system, which has been fortifying the company’s footprint worldwide. The Sequel System has been a significant contributor to Pacific Bioscience’s top line.

During the second-quarter earnings call in August, PacBio confirmed that about one-third of its Sequel IIe placements were new PacBio instrument customers across all of its target markets. This demonstrates that the company continues to grow despite various challenges.

Strong Q2 Results: PacBio’s robust increases in its overall top line and both its Product, and Service and other revenues in second-quarter 2022 are impressive. The company also gained from strength in its Instrument and Consumables revenues during the reported quarter. The solid performance in the Americas is also promising. The expansion of adjusted gross margin also bodes well for PacBio.

Downsides

Production Bottlenecks: PacBio must successfully manage new product introductions and transitions, including the Single Molecule, Real-Time Cell 8M and Sequel II/IIe Systems. However, the company may incur significant costs during these transitions, which may not result in the anticipated benefits.

Stiff Competition: PacBio operates in a highly competitive market where its competitors offer nucleic acid sequencing equipment or consumables. Many of these companies currently have greater resources and may be able to respond more quickly and effectively than PacBio to new or changing opportunities, technologies, standards or customer requirements.

Estimate Trend

PacBio has been witnessing a positive estimate revision trend for 2022. Over the past 90 days, the Zacks Consensus Estimate for its loss per share has narrowed from $1.38 to $1.37.

The Zacks Consensus Estimate for the company’s third-quarter 2022 revenues is pegged at $35.3 million, suggesting an 1.2% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN Quick QuoteAMN - Free Report) , ShockWave Medical, Inc. (SWAV Quick QuoteSWAV - Free Report) and McKesson Corporation (MCK Quick QuoteMCK - Free Report) .

AMN Healthcare, flaunting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 3.2%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 15.7%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has lost 6.7% compared with the industry’s 38.1% fall in the past year.

ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.

ShockWave Medical has gained 29.5% against the industry’s 34.5% fall over the past year.

McKesson, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10.1%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average beat being 13%.

McKesson has gained 70.5% against the industry’s 17.1% fall over the past year.