Pacific Biosciences of California, Inc. (PACB Quick QuotePACB - Free Report) , popularly known as PacBio, has been gaining from its slew of strategic deals over the past few months. The optimism, led by a solid fourth-quarter 2023 performance and its product development activities, is expected to contribute further. However, stiff competition and macroeconomic concerns persist.

Over the past year, this currently Zacks Rank #3 (Hold) stock has lost 70.5% against the 10.1% growth of the industry. The S&P 500 rose 24.9% in the same time frame.

The renowned global provider of sequencing systems has a market capitalization of $978 million. The company projects 10.4% growth for 2024 and expects to maintain a strong performance going forward. PacBio’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, delivering an average surprise of 13.1%.

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Let’s delve deeper.

Strategic Deals: We are optimistic about PacBio’s robust growth opportunities, thanks to its slew of strategic deals over the past few months. In November 2023, the company announced the addition of two tertiary analysis partners to PacBio Compatible. Geneyx and Golden Helix will enable PacBio customers to leverage PacBio HiFi data for disease research with the Revio, Sequel II and IIe sequencing systems.

In August 2023, PACB and GeneDx announced a research collaboration with the University of Washington to study the capabilities of HiFi long-read whole genome sequencing to increase diagnostic rates in pediatric patients with genetic conditions. PacBio also entered into an agreement to acquire Apton Biosystems.

This agreement with plans to integrate its Sequencing by Binding short-read chemistry with Apton's high throughput instrument (announced in August) also raised optimism about the stock.

Product Development Activities: We are optimistic about PacBio's solid potential in the RNA-sequencing market, which has been fortifying the company’s footprint worldwide. PacBio recently announced the PureTarget repeat expansion panel, a new approach that makes it possible to thoroughly examine 20 genes linked to severe neurological conditions, including difficult-to-sequence genes with tandem repeat expansions, is now possible.

In February, the company announced two new high throughput library preparation kits and workflows, namely, HiFi Prep Kit 96 and HiFi Plex Prep Kit 96, optimized for its Revio sequencing system.

In January, the company announced PanDNA, a versatile Nanobind DNA extraction kit. With the addition of this new offering, the range of sample types appropriate for long-read sequencing is now greater and includes bacteria, cells, tissue, blood, plant nuclei, and insects.

Strong Q4 Results: PacBio saw a strong increase in its overall top line, including strong Product revenues. Solid Consumables and Instrument revenues and strong geographical performances were also encouraging. Continued strong prospects in the Revio and Onso systems, with customers placing orders for these, looked promising for the stock.

Downsides

Macroeconomic Concerns: Macroeconomic dynamics, including rising inflation and global supply-chain constraints, have adversely impacted PacBio’s customers and lengthened customer sales cycles. These factors could impact its revenues and operations throughout 2024.

Stiff Competition: PacBio competes in a very competitive market with companies that provide supplies or equipment for nucleic acid sequencing. Since many of these businesses now possess more resources than PacBio, they could be able to react to new or evolving opportunities, standards, technologies, or consumer requirements more swiftly and successfully.

Estimate Trend

PacBio has been witnessing a positive estimate revision trend for 2023. Over the past 60 days, the Zacks Consensus Estimate for its adjusted loss per share has narrowed from $1.18 to $1.17.

The Zacks Consensus Estimate for the company’s fiscal year 2024 revenues is pegged at $237.1 million, indicating an 18.3% increase from the year-over-year reported number.

Pacific Biosciences of California, Inc. Price

Pacific Biosciences of California, Inc. price | Pacific Biosciences of California, Inc. Quote

Key Picks

Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA Quick QuoteDVA - Free Report) , Cardinal Health, Inc. (CAH Quick QuoteCAH - Free Report) and Cencora, Inc. (COR Quick QuoteCOR - Free Report) .

DaVita, sporting a Zacks Rank #1 (Strong Buy), has an estimated long-term growth rate of 12.1%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 35.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita’s shares have gained 58.3% compared with the industry’s 18.9% rise in the past year.

Cardinal Health, flaunting a Zacks Rank of 1 at present, has an estimated long-term growth rate of 14.2%. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average being 15.6%.

Cardinal Health has gained 51.9% compared with the industry’s 3.2% rise in the past year.

Cencora, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 9.8%. COR’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 6.7%.

Cencora’s shares have surged 51.5% compared with the industry’s 3.6% rise in the past year.