Analysts getting more realistic? R.W. Baird's Larry Nabor upgrades the stock to strong buy and lowers the price target to $31 based on a more reasonable P/E multiple. Audio at
biz.yahoo.com
I sense another buying opportunity in the teens, based on my cynicism concerning Mr. Nabors' possible agenda in making this move. I'll bet it would be really interesting to watch QGENF on Level II for a few days.
I listened to the CC. QGENF sees price competition and erosion in areas that are 10% of its business. Short, unmodified bulk oligos for sequencing -- now heading to just gap closing -- have seen considerable price erosion, but these amount to less than 5% of QGENF's business. Thus rumors that Operon's business is going south are way exaggerated: it's business is primarily longer, custom oligos, and it is growing at a 40%+ clip as a whole. Also, it is feasible for a certain ABI miniprep platform to use low quality, cheaper plasmid media. The failure rate is higher, but apparently worth the reduced cost to some folks in the market. Here there is also some erosion. This low end of the market accounts for only 10% the consumables business. Its instruments, which bundle well with the consumables grew at a 45% clip, paced by BioRobots. The consumables biz grew at a 25% clip as usual. QGENF still sees no slowdown in spending for its stuff.
Collaborations are going well. The Zymark and PreAnalytics (Becton Dickinson JV) deals have produced products in the early launch stage. Said the Zymark automation boosts BioRobot throughput 6 to 7 times. The ZeptoSens workstations are in early launch via a early access program. Bayer and Aventis have been announced; CEO said others were being evaluated unannounced. Vaguer about Genicon stuff, which is still in development phase. These address the core purification business. Saw a double digit (millions) market opportunity for Genicon products without considering synergies.
Margins are expected to improve as new, more efficient facilities come on line. Principally, a plant in Maryland and a plant and R&D program in Germany. The former up and running in 1Q02, the latter later that year. This will also minimize currency effects. DSOs, already among the best in the business, improved to 50 days (from low 60s last q). Inventories were also down a bit to 132 days. Cash was down some to $53, but fixed assets are way up, thanks to strong cash flow. They have pricing power across most product lines, and increased on average ~2% this year.
Cheers, Tuck |
