On Monday, a KeyBanc analyst maintained a positive outlook on shares of Avid Bioservices (NASDAQ:), reiterating an Overweight rating and $14.00 price target on the company’s shares. The endorsement follows a recent meeting with the company’s management during the BioProcess International (BPI) conference, which reinforced analyst confidence in the company’s revenue prospects.
The company’s strong fiscal first quarter results, announced on September 9, included new orders that significantly exceeded expectations, reaching $66 million compared to the $35 million anticipated, and more than doubling the previous quarter’s figures.
Despite slower uptake at the company’s new cell and gene therapy (CGT) facilities, overall business is skewed toward late-stage programs, which could lead to substantial revenue growth upon product approval high volume.
The analyst highlighted the potential impact of the BioSecure Act, which if passed, could act as a catalyst for new orders by forcing US-based customers to seek Contract Development and Manufacturing Organizations (CDMOs). in English) domestic rather than international suppliers such as WuXi Biologicals (HK:). Avid Bioservices is considered well positioned to capture business in this scenario, and management indicates a pipeline that includes several high-volume product candidates.
Discussion during the BPI conference also addressed the fact that while some customers continue to use services from companies like WuXi Biologics, possibly due to cost considerations, a prevailing belief within the industry that the BioSecure Act will likely be enacted. This legislation would require a shift for U.S.-based customers toward domestic alternatives, opening even more opportunities for Avid Bioservices to expand its customer base.
The analyst note elaborates on these ideas, highlighting the reasons for the sustained Overweight rating and unchanged price target for Avid Bioservices shares. The company’s direction and its growth potential in the coming quarters remain a focal point for investors watching the biopharmaceutical services sector.
In other recent news, Avid Bioservices reported mixed financial results for the first quarter of fiscal 2025. The company saw revenue increase 6% to $40.2 million, driven largely by higher process development revenue. However, it also faced a net loss of $5.5 million and an increase in selling, general and administrative expenses. Despite these challenges, the company secured $66 million in new project deals, contributing to a record order book of $219 million.
Avid Bioservices also anticipates growth in EBITDA and adjusted margins, with a potential 40% to 60% increase in incremental revenue. The company remains optimistic about its future, despite a long sales cycle with large pharmaceutical clients and challenges in the cell and gene therapy sector. Most of the new projects came from new clients, indicating a diversified client base.
These developments underscore the company’s resilience amid a dynamic industrial landscape. While the company’s net loss increased and SG&A expenses increased, it continues to secure new deals and diversify its customer base, demonstrating its commitment to growth.
InvestingPro Insights
Recent data from InvestingPro provides additional context to the financial position and market performance of Avid Bioservices (NASDAQ:CDMO). The company’s market capitalization stands at $723.44 million, reflecting its current market valuation. Despite analysts’ positive outlook, InvestingPro Tips highlights that Avid Bioservices is not currently profitable, with a negative P/E ratio of -5. This aligns with the company’s focus on growth and expansion in the CDMO space, as discussed in the analyst report.
Interestingly, CDMO has shown strong performance in the market, with a price return of 58.82% in the last three months and a return of 69.25% in the last six months. This strong stock performance supports the analyst’s bullish stance and may reflect investor confidence in the company’s potential to capitalize on industry trends, such as the potential enactment of the BioSecure Act.
However, investors should note that the company’s price-to-book ratio is relatively high at 12.34, which an InvestingPro tip notes as “trading at a high price-to-book multiple.” This valuation metric suggests that investors are pricing in significant future growth expectations, aligning with the analyst’s view of the company’s revenue prospects.
For readers interested in a more comprehensive analysis, InvestingPro offers additional insights and tips, with 7 more tips available for Avid Bioservices on the platform.
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