NEW YORK – JP Morgan on Wednesday gave Invitae's stock a Neutral rating from a previous Not Rated designation based on the company's recent financial progress and service expansions through recent mergers and acquisitions.
Analyst Tycho Peterson also increased Invitae's December 2021 stock price target to $45 from a prior December 2020 price target of $25.
Following Invitae's announcement in June that it would acquire ArcherDx, JP Morgan suspended its rating for Invitae and moved it to Not Rated from Overweight due to its involvement in the acquisition.
In a research note, Peterson highlighted that Invitae recently completed its $1.4 billion merger with ArcherDx, which allows the company to add somatic cancer testing to its broad suite of germline analysis services. Earlier this year, Invitae also acquired clinical decision support platform provider YouScript, pharmacogenetics firm Genelex, and artificial intelligence software company Diploid. Last year, the company bought artificial intelligence variant interpretation firm Jungla.
Peterson also noted that the company has managed to drive lower costs and improve customer experience, despite industry consolidation and recovered well from the COVID-19 impact. The company's second quarter financial performance, during which it reported $46.1 million in revenues, was a 14 percent decline from the year-ago period, but better than the consensus Wall Street estimate.
The company had "encouraging volume recovery trends through July," Peterson said, noting that the company's stock has increased more than 500 percent since "March lows." Factoring in the latest ArcherDx acquisition and the range of cancer monitoring and therapy optimization assets it adds to Invitae's portfolio, Peterson is projecting diagnostic sales of $509 million in 2021 and $705 million in 2022.
"As we look past the temporary impact from COVID-19, we continue to believe that steadily improving reimbursement trends in both hereditary cancer and prenatal testing, penetration into newer markets (including the centralized and decentralized opportunity in germline testing, cancer monitoring and therapy optimization) and traction with pharma partnerships, provide support for future growth," he wrote. "However, at current levels, much of this also appears factored into valuation, prompting us to move to a Neutral rating and December 2021 price target of $45."
In early Wednesday morning trading on the Nasdaq, Invitae's shares were down 2 percent at $51.44.