NEW YORK (GenomeWeb) – In a note to investors, William Blair today upgraded Waters to Outperform.
The company's miss on third quarter earnings caused its stock to pull back, analyst Amanda Murphy wrote in her note. But after trading at a premium to the tools group for the past few years, the stock dip makes valuation on the shares more attractive, "providing a rare opportunity to own a high-quality name," she added.
Further, Murphy noted, Waters' chromatography and mass spectrometry products are used in pharmaceutical testing and development, as well as food testing, and are therefore exposed to "strong secular trends." This includes an estimated 24 percent increase in doses of medicine administered globally between 2015 and 2020.
"The opportunity for Waters is driven by global per pill increases in generic usage, in turn driven by expanded access via healthcare reform and favorable demographic trends (aging populations and growing incomes); growth in applied markets, such as food safety; and continued investment by biopharma in drug development," Murphy wrote.
Additional rationale for the upgrade included anticipated positive dynamics in biopharma funding and spending.
Murphy found that estimates for Waters were appropriately conservative given recent weakness in the academic market and that the firm has an industry leading return on invested capital.
In November Leerink also upgraded Waters to Outperform and assigned a $163 12-month price target.
Waters' stock was up in afternoon trading on the Nasdaq nearly 5 percent at $140.74.