Simulation Plus is a buy because of the growing market in drug trial simulations, BTIG said. Analyst David Larsen initiated coverage of the stock with a buy rating, and a $55 price target, saying the firm is a category leader for model-informed drug development (MIDD), or simulations for biotech drug trials. “In our view using highly specialized, detailed and complex simulation models is a key, required piece of nearly all bio-tech and pharmaceutical drug development efforts,” Larsen said. “As products make their way through clinical trial studies, researchers need models that can analyze and accurately assess things like the absorption rate and drug interaction of compounds, toxicity and liver safety, insights around clinical trial simulations, and technical writing for regulatory submissions.” Investor interest in the stock spiked this year, with Simulations Plus roughly 12% higher after falling the prior two years. The stock was down 22% in 2022, and 33% in 2021. However, the analyst’s $55 price target implies the stock could jump 35% from Monday’s closing price. On Tuesday, the stock rose 2.1%. SLP 1D mountain Simulations Plus shares 1-day The analyst expects the fast-growing MIDD sector will drive upside for Simulations Plus, saying he expects the total addressable market is about $2 billion, while global clinical trials have a TAM of about $70 billion. He forecasts Simulations Plus can grow revenue by about 10% to 15% annually. Larsen added that Simulations Plus hasn’t faced the same issue raising capital that is plaguing smaller firms. “This means that as the pace of overall clinical trials continues to grow, SLP should also rise with a lifting tide,” Larsen said. “We view SLP’s current market penetration rate as being fairly low, which means that there is a lot of space for SLP to take share.” — CNBC’s Michael Bloom contributed to this report.