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On Tuesday, KeyBanc Capital Markets maintained a positive outlook on Castle Biosciences (NASDAQ:CSTL), reiterating an Overweight rating and a $36.00 price target. The firm’s analyst highlighted the company’s strong performance in the first quarter of 2025, with a 21% year-over-year revenue increase and notable growth in TissueCypher test volumes, which surged 117% compared to the same period last year. According to InvestingPro data, the company has demonstrated impressive financial health with an overall score of "GREAT" and maintained a robust gross profit margin of 82% over the last twelve months.
Castle Biosciences has adjusted its product offerings and sales strategies, discontinuing the IDgenetix test due to lack of reimbursement and acquiring Previse to strengthen its gastrointestinal portfolio. Despite the DecisionDX-SCC test no longer being reimbursed as of April 24, 2025, the company has seen growth in other areas, including a 2.8% increase in DecisionDxMelanoma test volumes in the quarter. InvestingPro analysis reveals the company maintains a strong balance sheet with more cash than debt and a healthy current ratio of 7.29, providing financial flexibility for its strategic initiatives.
The company’s updated guidance reflects confidence in its revenue growth for the full year. Castle Biosciences anticipates higher-than-standard volume growth for the DecisionDxMelanoma test throughout the year. This optimism is underscored by the company’s strategic moves, which include the expansion of its dermatology salesforce to a size in the high-60s, focused on melanoma, and a gastrointestinal salesforce in the mid-60s, centered around TissueCypher.
In response to the company’s first-quarter performance and updated full-year guidance, KeyBanc has released a revised model. The firm’s continued endorsement of Castle Biosciences comes as the company makes strides in optimizing its test portfolio and salesforce to drive growth in its specialized diagnostic tests.
In other recent news, Castle Biosciences reported a significant 21% year-over-year revenue increase for the first quarter of 2025, reaching $88 million, surpassing expectations. Despite the revenue growth, the company reported a net loss of $25.8 million and missed earnings per share expectations, which were reported at -$0.20 against a forecasted -$0.06. The company raised its 2025 revenue guidance to a range of $287-$297 million, reflecting optimism about future growth. Castle Biosciences also announced the acquisition of ProVise, a company specializing in gastrointestinal diagnostics, to enhance its product offerings, though immediate revenue impact from this acquisition is not anticipated. BTIG analyst Sung Ji Nam adjusted the price target for Castle Biosciences shares to $32 from $40, maintaining a Buy rating due to the company’s current valuation and potential for reimbursement reconsideration. Recent challenges included the discontinuation of the IDGenetix test and the loss of CMS coverage for its SCC test, but BTIG remains optimistic about possible reimbursement recovery. The acquisition of Previse, another recent development, is seen as a strategic move to mitigate competition risks, though it is not expected to expand the company’s total addressable market.
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