Scotiabank cuts PACB stock target to $2, maintains outlook

In conclusion, while Pacific Biosciences (NASDAQ:PACB) faces near-term growth challenges, with an EBITDA of -$249.48 million in the last twelve months, Scotiabank (TSX:BNS)’s outlook remains optimistic about the company’s long-term prospects and its position in the life science tools sector. The stock’s beta of 1.86 indicates higher volatility compared to the broader market, presenting both risks and opportunities for investors.

The reduction in the price target comes after a challenging fiscal year 2024 for Pacific Biosciences, marked by significant capital spending constraints in the end-market. The company’s revenue declined by 23.2% in the last twelve months, with total revenue of $154 million. The launch of Vega, their first HiFi long-read benchtop sequencer, was anticipated to significantly boost revenue. However, uncertainties surrounding near-term academic funding in the U.S. have tempered growth expectations for the foreseeable future. This is particularly impactful for Pacific Biosciences, which has approximately 20% of its exposure to U.S. academic spending.

Scotiabank continues to recognize Pacific Biosciences for its unique long-read next-generation sequencing capabilities. The firm believes the company is well-positioned to lead in innovation, offering faster, more affordable, user-friendly, and insightful sequencing solutions, including multi-omic next-generation sequencing (NGS) capabilities. The analyst foresees a considerable growth potential for Pacific Biosciences’ HiFi long-read sequencing technology in the long term.

Despite the lowered expectations, Scotiabank asserts that Pacific Biosciences is adequately funded to achieve cash flow positivity by the end of 2027, adjusting the previous forecast from 2026. The company maintains a strong current ratio of 7.48, indicating solid short-term liquidity. The new price target of $2 is based on discounted cash flow analysis and corresponds to roughly 4 times the 2026 estimated enterprise value to sales ratio. For deeper insights into PACB’s financial health and detailed valuation metrics, InvestingPro subscribers can access comprehensive analysis and additional ProTips in the Pro Research Report.

In conclusion, while Pacific Biosciences faces near-term growth challenges, with an EBITDA of -$249.48 million in the last twelve months, Scotiabank’s outlook remains optimistic about the company’s long-term prospects and its position in the life science tools sector. The stock’s beta of 1.86 indicates higher volatility compared to the broader market, presenting both risks and opportunities for investors.

In other recent news, Pacific Biosciences of California reported a 33% drop in quarterly revenue to $39.2 million and a 23% decrease in annual revenue to $154 million for 2024. Despite this decline, the company launched new products, including the Vega sequencing system and SPRQ chemistry for the Revio system, aimed at expanding their market reach. Pacific Biosciences has also extended its lease for headquarters and facilities in Menlo Park until 2034, benefiting from a rent abatement and tenant improvement allowance. Cantor Fitzgerald maintained an Overweight rating for Pacific Biosciences, with a $2.50 price target, while expressing concerns over NIH funding uncertainties impacting the company’s revenue. The firm noted the company’s significant market presence in the Asia-Pacific region, which contributes 27% to its total revenue. Pacific Biosciences also announced the delivery of its Vega systems to Berry Genomics in China, under an early access agreement to support genetic screening programs. Berry Genomics plans to purchase over 50 Vega units and is working on regulatory approvals in China and other countries. Financially, Pacific Biosciences exchanged $459 million in convertible notes for new notes and cash, strengthening its financial position with an estimated $390 million in cash and investments by the end of 2024.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.