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Reasons to Retain PacBio (PACB) Stock in Your Portfolio Now
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Pacific Biosciences of California, Inc. (PACB - Free Report) , popularly known as PacBio, has been gaining from its continued focus on research and development and a robust product portfolio. The optimism, led by a decent second-quarter 2024 performance and its product development activities, is expected to contribute further. However, stiff competition and longer purchasing cycles remain a cause of concern.
In the year-to-date period, this Zacks Rank #3 (Hold) company has lost 82.3% against 9.2% growth of the industry. The S&P 500 Composite has also gained 15% in the said time frame.
The renowned global provider of sequencing systems has a market capitalization of $452.4 million. The company projects 13.5% growth for 2024 and expects to maintain its strong performance in the future. PacBio’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and met the same in one, delivering an average surprise of 9.9%.
Image Source: Zacks Investment Research
Reasons Favoring PacBio’s Growth
Focus on R&D: We are optimistic about PacBio’s continued R&D efforts that focus on programs to develop new and existing platforms, as well as increasing throughput and decreasing costs on behalf of its customers.
PacBio is working toward improving commercial execution to drive the adoption of both the Revio and Onso platforms. In May, PacBio launched an attractive promotional offer for the system, which garnered customer interest and increased order opportunities for Onso’s sales pipeline.
Per the management, PACB is also working on a high-throughput short-read platform, which should make it possible for the business to supply its industry-leading Sequencing by Binding technology to high-throughput labs. The company anticipates that it will compete strongly with rival services in terms of pricing and throughput. The addressable market for this platform, per management, is projected to be more than $1 billion annually.
PacBio also continues to develop its next-generation SMRT cell. This cell is expected to power a new long-read platform whose throughput exceeds the Revio system.
Robust Product Portfolio: We are optimistic about PacBio's solid product portfolio which has been fortifying the company’s footprint worldwide. The company witnessed tremendous interest in its Kinnex full-length RNA kits, which were launched in the fourth quarter of 2023. In the second quarter of 2024, Kinnex surpassed $1 million in quarterly revenues and helped drive Revio placements.
The company also launched and began shipping of PacBio PureTarget panel in late March. PacBio’s Nanobind DNA extraction kit, which the company started to ship in March 2024, is witnessing great interest from customers ranging from pediatric hospitals to large commercial testing labs, biopharma, and academic labs.
PacBio’s Hifi prep and plex library prep, which was launched during the first quarter, is further enabling the customers to automate and scale on the Revio platform. These kits allow Revio customers to prepare up to 96 libraries at a time at a lower cost per library.
PacBio is also continuously enhancing its software, along with launching new library prep and sample prep solutions, that would make its sequencing more accessible. Management believes that the new products may contribute to a recurring revenue stream apart from the core SMRT cells and sequencing reagents.
Mixed Q2 Results: PacBio exited the second quarter of 2024 with mixed results, where earnings beat the Zacks Consensus Estimate, and revenues missed the same.
PACB saw an uptick in Service and other revenues, as well as Consumables revenues.However, geographically, revenues declined in the Americas, Asia-Pacific region and EMEA, which seems concerning. A decrease in adjusted gross profit does not bode well for the stock. However, continued strong prospects in the Revio system, with customers placing orders for these, looked promising for the stock.
Factors That May Offset the Gains for PACB
Longer Purchasing Cycles: The company is facing longer customer purchasing cycles, especially for Revio. The instrument shortfall primarily resulted from elongated customer purchasing cycles as the median sales cycle for Revio instrument purchases increased more than the company expected in the second quarter of 2024. More specifically, PACB believes that the sales cycle increased primarily because of uncertainty surrounding the timing of funding for new capital equipment, particularly in the United States and China.
The company is facing pricing pressure in China, which impacted Revio sales during the second quarter. Further, the company has experienced, and may in the future also experience, difficulty in managing or forecasting customer reactions, purchasing decisions or transition requirements with respect to newly launched products.
Business Seasonality: PacBio operates on a December year-end basis and believes that there are significant seasonal factors that may cause sales of its products, and particularly its sequencing instruments, to vary on a quarterly or yearly basis, contributing to the lengthy sales cycle for its sequencing instruments, and increase the magnitude of quarterly or annual fluctuations in its operating results.
Estimate Trend
PacBio has been witnessing a stable estimate revision trend for the third quarter of 2024, ahead of its earnings. Over the past seven days, the Zacks Consensus Estimate for its adjusted loss per share is pinned at 20 cents.
The Zacks Consensus Estimate for revenues is pegged at $41.9 million, indicating a 24.7% decrease from the year-ago reported number.
Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Service has gained 56.1% compared with the industry's 48.1% rise so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics shares have gained 13.9% so far this year compared with the industry’s 17.9% rise.
ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.
ABM's shares have risen 27.4% so far this year compared with the industry’s 17% growth.
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Reasons to Retain PacBio (PACB) Stock in Your Portfolio Now
Pacific Biosciences of California, Inc. (PACB - Free Report) , popularly known as PacBio, has been gaining from its continued focus on research and development and a robust product portfolio. The optimism, led by a decent second-quarter 2024 performance and its product development activities, is expected to contribute further. However, stiff competition and longer purchasing cycles remain a cause of concern.
In the year-to-date period, this Zacks Rank #3 (Hold) company has lost 82.3% against 9.2% growth of the industry. The S&P 500 Composite has also gained 15% in the said time frame.
The renowned global provider of sequencing systems has a market capitalization of $452.4 million. The company projects 13.5% growth for 2024 and expects to maintain its strong performance in the future. PacBio’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and met the same in one, delivering an average surprise of 9.9%.
Image Source: Zacks Investment Research
Reasons Favoring PacBio’s Growth
Focus on R&D: We are optimistic about PacBio’s continued R&D efforts that focus on programs to develop new and existing platforms, as well as increasing throughput and decreasing costs on behalf of its customers.
PacBio is working toward improving commercial execution to drive the adoption of both the Revio and Onso platforms. In May, PacBio launched an attractive promotional offer for the system, which garnered customer interest and increased order opportunities for Onso’s sales pipeline.
Per the management, PACB is also working on a high-throughput short-read platform, which should make it possible for the business to supply its industry-leading Sequencing by Binding technology to high-throughput labs. The company anticipates that it will compete strongly with rival services in terms of pricing and throughput. The addressable market for this platform, per management, is projected to be more than $1 billion annually.
PacBio also continues to develop its next-generation SMRT cell. This cell is expected to power a new long-read platform whose throughput exceeds the Revio system.
Robust Product Portfolio: We are optimistic about PacBio's solid product portfolio which has been fortifying the company’s footprint worldwide. The company witnessed tremendous interest in its Kinnex full-length RNA kits, which were launched in the fourth quarter of 2023. In the second quarter of 2024, Kinnex surpassed $1 million in quarterly revenues and helped drive Revio placements.
The company also launched and began shipping of PacBio PureTarget panel in late March. PacBio’s Nanobind DNA extraction kit, which the company started to ship in March 2024, is witnessing great interest from customers ranging from pediatric hospitals to large commercial testing labs, biopharma, and academic labs.
PacBio’s Hifi prep and plex library prep, which was launched during the first quarter, is further enabling the customers to automate and scale on the Revio platform. These kits allow Revio customers to prepare up to 96 libraries at a time at a lower cost per library.
PacBio is also continuously enhancing its software, along with launching new library prep and sample prep solutions, that would make its sequencing more accessible. Management believes that the new products may contribute to a recurring revenue stream apart from the core SMRT cells and sequencing reagents.
Mixed Q2 Results: PacBio exited the second quarter of 2024 with mixed results, where earnings beat the Zacks Consensus Estimate, and revenues missed the same.
PACB saw an uptick in Service and other revenues, as well as Consumables revenues.However, geographically, revenues declined in the Americas, Asia-Pacific region and EMEA, which seems concerning. A decrease in adjusted gross profit does not bode well for the stock. However, continued strong prospects in the Revio system, with customers placing orders for these, looked promising for the stock.
Factors That May Offset the Gains for PACB
Longer Purchasing Cycles: The company is facing longer customer purchasing cycles, especially for Revio. The instrument shortfall primarily resulted from elongated customer purchasing cycles as the median sales cycle for Revio instrument purchases increased more than the company expected in the second quarter of 2024. More specifically, PACB believes that the sales cycle increased primarily because of uncertainty surrounding the timing of funding for new capital equipment, particularly in the United States and China.
The company is facing pricing pressure in China, which impacted Revio sales during the second quarter. Further, the company has experienced, and may in the future also experience, difficulty in managing or forecasting customer reactions, purchasing decisions or transition requirements with respect to newly launched products.
Business Seasonality: PacBio operates on a December year-end basis and believes that there are significant seasonal factors that may cause sales of its products, and particularly its sequencing instruments, to vary on a quarterly or yearly basis, contributing to the lengthy sales cycle for its sequencing instruments, and increase the magnitude of quarterly or annual fluctuations in its operating results.
Estimate Trend
PacBio has been witnessing a stable estimate revision trend for the third quarter of 2024, ahead of its earnings. Over the past seven days, the Zacks Consensus Estimate for its adjusted loss per share is pinned at 20 cents.
The Zacks Consensus Estimate for revenues is pegged at $41.9 million, indicating a 24.7% decrease from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Universal Health Service (UHS - Free Report) , Quest Diagnostics (DGX - Free Report) and ABM Industries (ABM - Free Report) . While Universal Health Service sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Service has gained 56.1% compared with the industry's 48.1% rise so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics shares have gained 13.9% so far this year compared with the industry’s 17.9% rise.
ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.
ABM's shares have risen 27.4% so far this year compared with the industry’s 17% growth.