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Here's Why You Should Hold Pacific Biosciences (PACB) Now

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Pacific Biosciences of California Inc. (PACB - Free Report) is gaining prominence in the MedTech space, courtesy of its flagship platform — the Sequel system. Notably, Sequel system is a nucleic acid sequencing platform based on Single Molecule, Real-Time (SMRT) technology.

The company currently has a market capitalization of approximately $1.14 billion. However, a highly competitive sequencing market, pricing pressure and sluggish performance in Europe are major headwinds.

In a year’s time, this Zacks Rank #3 (Hold) stock has soared 166.7% compared with the industry’s 15.6% growth.

Here we take a quick look at Pacific Biosciences’ major headwinds and discuss the factors that ensure near-term recovery.

What’s Deterring the Stock?

In Europe, Pacific Biosciences’ sales have declined substantially on a year-over-year basis and missed the company’s target. A number of the company’s customers over there have been slow in initiating the usage of Sequel systems. Consequently, European markets have witnessed limited Pacific Biosciences’ products growth in the recent past.

Consequently, analysts are pessimistic about Pacific Biosciences as of now. The Zacks Consensus Estimate for current-quarter earnings is pegged at a loss of 14 cents. The consensus mark for the revenues stands at $21.1 million, reflecting15.5% decline year over year.

For 2018, the Zacks Consensus Estimate for revenues is pegged at $80.2 million, mirroring14.2% decline. For adjusted earnings, the same is pinned at a loss of 16 cents.

Pacific Biosciences of California, Inc. Price and Consensus

 

Why Should You Still Retain the Stock?

Illumina Inc. (ILMN - Free Report) recently announced that it is acquiring Pacific Biosciences at a price of $8 per Pacific Biosciences share in an all-cash transaction. Per management, the total value of the deal is approximately $1.2 billion. The agreement has been approved by the board of directors of Illumina and Pacific Biosciences and is expected to close by mid-2019.

In the recent past, the company unveiled the upgraded Sequel System and new multiplexing tools at the American Society for Microbiology to make the process of obtaining microbial genomes highly accurate, faster and more affordable.

Other Stocks to Consider

A few better-ranked stocks in the broader medical space are Quidel Corporation (QDEL - Free Report) and STAAR Surgical Company (STAA - Free Report) .

Quidel Corporation has a long-term expected earnings growth rate of 25% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

With a Zacks Rank #1, STAAR Surgical delivered average four-quarter positive earnings surprise of 400%.

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