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On Wednesday, BTIG analyst Mark Massaro adjusted the price target for Neogenomics (NASDAQ: NEO) stock, bringing it down to $17.00 from the previous $18.00, while reiterating a Buy rating on the shares. Currently trading at $12.70, the stock has seen a sharp 10% decline over the past week, according to InvestingPro data. The revision follows a significant ~30% decline in the company’s stock value after the announcement last month that CEO and turnaround specialist Chris Smith would depart from his roles as CEO and board member effective April 1st.
Neogenomics experienced a shortfall in its biopharma business by $1 million in Q4 and has decided to stop providing separate financial reports for this segment, as disclosed on their Q4 earnings call. Despite these challenges, Massaro highlighted the company’s solid fundamentals, noting a 15% year-over-year growth in clinical services revenue for Q4 2024. This increase was attributed to a 9% rise in volume and a 5% hike in pricing. The company’s overall revenue reached $660.6 million in the last twelve months, with a healthy gross profit margin of 43.9%.
The company has reaffirmed its revenue guidance for 2025, projecting an 11-13% year-over-year increase and long-range top-line growth of 12-13% year-over-year. This aligns with the company’s historical performance, as InvestingPro data shows a 5-year revenue CAGR of 10%. Neogenomics’ Next (LON:NXT) Generation Sequencing (NGS) continues to drive growth, currently representing over 30% of clinical revenue. The anticipated launch of NEO’s NEO Pan Tracer liquid biopsy blood test panel in the first half of 2025 is expected to further contribute to the company’s growth.
Additionally, Massaro mentioned the upcoming clinical validation of RaDaR 1.1, a minimal residual disease (MRD) test, in the first half of 2025, although this is not included in the company’s 2025 revenue projections. Despite the recent drop in stock price following the CEO’s departure announcement, Massaro emphasized that the fundamentals remain positive, noting that the stock is trading at 2.2 times their 2026 revenue estimate of $818 million, which is below the average for small to mid-size (SMID) peers, which trade at 5.4 times revenue. With analyst targets ranging from $16 to $26, and a consensus recommendation leaning towards Buy, the stock appears undervalued based on InvestingPro’s Fair Value analysis. The Buy rating has been maintained with a slightly reduced price target to reflect recent events.
In other recent news, NeoGenomics (NASDAQ:NEO) reported its fourth-quarter 2024 earnings, revealing a slight revenue miss but surpassing earnings per share (EPS) expectations. The company recorded revenue of $172 million, just below the anticipated $173.05 million, while EPS came in at $0.04, exceeding the forecast of $0.03. For the full year, NeoGenomics’ revenue rose 12% to $661 million, with an adjusted EBITDA of $40 million, marking a significant turnaround from a negative $48 million in 2022. Looking ahead, the company projects 2025 revenue between $735 million and $745 million, with EPS guidance of $0.15 to $0.19, slightly below the consensus of $0.20.
In response to these results, Morgan Stanley (NYSE:MS) adjusted its outlook on NeoGenomics, reducing the stock target from $18 to $17, while maintaining an Equalweight rating. The firm’s analysts highlighted the importance of the company’s product pipeline and commercial strategy under new leadership. Similarly, Needham lowered its price target from $19 to $18 but retained a Buy rating, citing revenue shortfalls but noting the company’s EBITDA exceeded expectations.
Despite the revenue miss, NeoGenomics continues to focus on strategic initiatives, including next-generation sequencing and minimal residual disease testing. CEO Chris Smith emphasized the company’s consistent double-digit revenue growth and its strong position for future expansion, driven by robust customer demand and upcoming product launches. Investors remain watchful of NeoGenomics’ progress in these areas as the company navigates challenges and opportunities in the competitive diagnostics market.
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