Skip to main content
Premium Trial:

Request an Annual Quote

Canaccord Genuity Downgrades Cepheid to Hold

NEW YORK (GenomeWeb) – Following Cepheid's third quarter financial results, investment bank Canaccord Genuity today downgraded the molecular diagnostic firm's stock to a Hold rating.

Analyst Mark Massaro also lowered his price target on Cepheid's stock to $34 from $42. 

The changes come after Cepheid said that its Q4 revenues rose 10 percent year over year, but still fell short of the consensus Wall Street estimate. 

In downgrading the company's shares from a previous Buy rating, Massaro cited changes to Cepheid's sales force and flattening sales of the firm's lead assay for methicillin-resistant Staphylococcus aureus. In a research note, he said that Cepheid has more than doubled its sales force to 96 from 43 since January. While the increase is aimed at increasing hospital accounts, "we are concerned that the company grew the sales force too quickly," Massaro said, adding that the territories of some sales representatives were cut in half, while other territories are "slightly different," and still others are completely new. 

Further, Cepheid said sales of its MRSA assay grew only in the low-single digits in Q3, signaling "the market is largely saturated,"said Massaro. Meanwhile, concerns have arisen over a possible overdiagnosis of Clostridium difficile, for which the company also has an assay. 

Though the firm's top-line growth could remain in the double digits, "we are concerned that growth is slowing down," Massaro said. 

Cepheid also provided initial 2016 gross margin targets of between 51 percent and 52 percent and a 2017 gross margin target of about 60 percent. According to Massaro, the 2017 target is a "best-case scenario" for Cepheid, and in order to achieve that figure, the firm would have to overcome a number of obstacles. 

In afternoon trading on the Nasdaq, Cepheid's shares were down 9 percent at $29.43. 

Last week, Raymond James also downgraded the company's shares to Market Perform after it preannounced its Q3 financial results.