NEW YORK (GenomeWeb) – Investment bank Leerink Partners today said it has downgraded Bruker's stock to Market Perform from Outperform based on expectations that margin expansion will be more difficult than is indicated by the current stock price.
Bruker's stock has appreciated 55 percent in the past year compared to no appreciation for the S&P 500, wrote Leerink analyst Dan Leonard in his note today. Leerink believes "the large, discrete activities for margin expansion are in the rear view mirror," he added.
Additionally, Leonard noted that, compared to its peers in the life science tools market, Bruker derives a high percentage of its revenue from instruments, which typically have a lower margin than consumables.
"An appropriate instrument-heavy comp group suggests margins in the 15 percent to 16 percent corridor are eventually doable," Leonard wrote. "The run in [Bruker's] stock price worries us that the 20 percent bull scenario we've heard in the past is circulating once again, and we think this unrealistic."
At the same time, Leerink raised the price target for Bruker's stock from $26 per share to $27 per share based on multiple expansions of the company's larger tools peer group where, Leonard wrote, "group EBITDA multiple has expanded by [roughly two-fold] in the past two months."
Bruker's shares gained nearly 8 percent in March.
The firm's stock was down nearly 4 percent to $28.40 in morning trading on the Nasdaq.