Abaxis Reverts to Neutral - Analyst Blog
14 8월 2012 - 12:15AM
Zacks
The share price of
Abaxis (ABAX) reached its 52-week high last month
and has witnessed some profit booking since then. Given its
stretched valuation, we expect a limited upside potential for the
stock at present and hence we revert back to Neutral with a target
price of $40.00.
The veterinary market is a major
contributor to the company’s top-line growth. Abaxis reported
strong results in the first quarter of fiscal 2013 (up 17% year
over year) based on strength in this market. Alongside, the
company’s new full-service laboratory testing facility, Abaxis
Veterinary Reference Laboratories (AVRL), is complimenting the
growth of the company’s veterinary segment. AVRL, in its third full
quarter of operations, generated revenue of $860,000 (up 83%
sequentially).
Moreover, the company witnessed a
consistent increase in Piccolo placement. During the reported
quarter, total revenue from the medical market increased 18% year
over supported by 48% increase in Piccolo placement. The company is
also working on getting large-scale business for Piccolo. With
various core marketing programs being undertaken, Abaxis expects
placement rates to increase further.
We also note that the company is
taking initiatives to expand in the international medical market.
The recent contract with a leading international biotechnology
company to deliver 300 Piccolo Xpress instruments is a big step in
this regard.
However, we remain apprehensive
about Abaxis’ dependence on distributors. Abaxis has had issues
with its international distributors in the past, which made it
difficult to establish a steady distribution network overseas.
Thus, the failure to successfully develop and maintain
relationships with these distributors could adversely affect the
company’s business.
We are also concerned about the
bottom-line pressure faced by Abaxis. In the reported quarter, the
company incurred legal expense of $850,000primarily related to a
patent infringement case against Cepheid (CPHD)
with respect to Cepheid’s Methicillin-resistant Staphylococcus
aureus(“MRSA”) product, on which Cepheid has ceased paying license
royalties. The situation could further deteriorate for Abaxis if
these issues are not resolved in the near future.
Notably, in 2005, Abaxis and
Cepheid entered into a royalty license agreement for certain
patents related to lyophilization technology under which Cepheid
introduced a manufacturing process outside the scope of Abaxis
patents.
Besides, the presence of many big
players like Alere Inc. (ALR) and Idexx
Laboratories Inc. (IDXX) that have greater resources has
made the human and veterinary diagnostic market highly
competitive.
Last week Alere reported its second
quarter 2012 adjusted EPS of 42 cents, trailing the corresponding
Zacks Consensus Estimate of 50 cents. Net revenues came in at
$700.5 million in the reported quarter, up 23.5% year over year,
easily surpassing the Zacks Consensus Estimate of $654 million.
Idexx Laboratories announced its second quarter 2012 results on
July 20, 2012. The company reported a 10% year over year increase
in EPS to 91 cents on revenues of $335.6 million (up 6% year over
year).
Abaxis on the other handreported an
EPS of just 13 cents in the first quarter of fiscal 2013, which
missed the Zacks Consensus Estimate by 4 cents or 23.5% (although
the 30% increase from last year was encouraging).
Revenues during the quarter
increased 17% year over year to $42.0 million, and surpassed the
Zacks Consensus Estimate of $40 million. The growth was based on
higher sales in both North America (up 12% to $33.2 million) and in
the international market (up 41% to $8.8 million).
The company has not provided any
outlook for the upcoming period. However, the Zacks Consensus
revenue and EPS estimates for the second quarter of fiscal 2013
remain at $45 million and 19 cents, respectively.
Abaxis currently retains a Zacks #3
Rank, which translates into a short-term Hold rating.
ABAXIS INC (ABAX): Free Stock Analysis Report
ALERE INC (ALR): Free Stock Analysis Report
CEPHEID INC (CPHD): Free Stock Analysis Report
IDEXX LABS INC (IDXX): Free Stock Analysis Report
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Abaxis, Inc. (delisted) (NASDAQ:ABAX)
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Abaxis, Inc. (delisted) (NASDAQ:ABAX)
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