NEW YORK ─ Evercore ISI on Tuesday upgraded its rating for Hologic to Outperform from In Line with a new share price target of $78, up from $73, saying that the firm's growth prospects have been elevated by recent acquisitions funded by COVID-19 testing profits.
The investment bank believes that Hologic's recent tuck-in M&A strategy "is smart … and plays to its strengths," including point-of-care diagnostic testing and breast health, Evercore research analyst Vijay Kumar wrote in a research note.
"Over the years, we have seen Hologic go through its various phases of evolution," Kumar said. "We believe that its current evolutionary phase represents something that is quite different from the past. … Hologic is sticking to its core competency and making smart tuck-in acquisitions to sustain a [mid-single-digit revenue growth] profile."
In the first half of this year, the Marlborough, Massachusetts-based company announced acquisitions of Mobidiag, a developer of MDx tests and instrumentation, for approximately $795 million; Diagenode, a European developer and manufacturer of MDx diagnostic assays and epigenetics products, for approximately $159 million; and Biotheranostics, a developer of diagnostic, prognostic, and predictive cancer tests, for approximately $230 million.
Through its recent acquisitions, Hologic has added greater than $100 million of annual revenues that are likely to grow at a 20 percent compound annual growth rate for the foreseeable future, Kumar said.
Kumar noted that he believes investors are refocusing on Hologic's base business, given an anticipated "major cut" to COVID-19 testing revenues for some diagnostic companies in fiscal year 2022.
In early Tuesday morning trading on the Nasdaq, Hologic shares were up more than 1 percent to $68.68.