NEW YORK — Investment bank TD Cowen on Tuesday initiated coverage of Standard BioTools with a Buy rating and a stock price target of $3.50.
In a note to investors, analyst Dan Brennan cited the company's new management and its efforts to streamline business operations as key to growth and a return to profitability. He also said that Standard BioTools' recent merger with protein detection firm SomaLogic provides additional growth opportunities.
"New management has initiated several organizational changes, including the introduction of the Standard BioTools Business System, a business philosophy that emphasizes operational discipline," Brennan wrote. He noted that in 2023, under new management, the company reduced non-GAAP operating expenses by 17 percent year over year and lowered its cash burn by 53 percent.
Standard BioTools' razor/razorblade model, in which users of its platforms must use its proprietary reagents, also helps drive a stream of predictable, recurring revenue from consumables, according to Brennan. Meantime, the SomaLogic deal nearly doubled the company's revenue base, grew its product portfolio, expanded its customer reach, and strengthened its balance sheet.
Brennan added that further acquisitions, particularly smaller ones, could "easily tuck into the existing [Standard BioTools] infrastructure and contribute a positive margin," although no deals are anticipated in the near term.
Despite its potential path to profitability, post-merger Standard BioTools continues to burn cash and execution risk remains, he wrote. "It’s still early innings in the new business structure, and there is much to execute on to increase confidence" that business goals are achievable, he noted. Other headwinds include competition from both larger and niche players in the highly competitive genomic and proteomic markets.
In morning trading on the Nasdaq, shares of South San Francisco, California-based Standard BioTools were down a fraction of a precent at $2.76.