Avid Bioservices retains stock target on growth confidence By Investing.com

On Monday, a KeyBanc analyst maintained a positive outlook on Avid Bioservices (NASDAQ:) shares, reiterating an Overweight rating and a $14.00 price target for the company’s stock. The endorsement follows a recent gathering with the company’s management during the BioProcess International (BPI) conference, which bolstered the analyst’s confidence in the firm’s revenue prospects.

The company’s robust fiscal first-quarter results, announced on September 9th, featured new orders that significantly exceeded expectations, reaching $66 million compared to the anticipated $35 million, and more than doubling the previous quarter’s figures.

Despite a slower uptake in the company’s new cell & gene therapy (CGT) facility, the overall business is skewed towards late-stage programs, which could lead to a substantial revenue increase upon the approval of high-volume products.

The analyst highlighted the potential impact of the BioSecure Act, which if passed, could act as a catalyst for new orders by compelling U.S.-based customers to seek domestic Contract Development and Manufacturing Organizations (CDMOs) over international providers like WuXi Biologics (HK:). Avid Bioservices is considered well-positioned to capture business in this scenario, with management indicating a pipeline that includes several high-volume product candidates.

The discussion during the BPI conference also touched on the fact that while some customers continue to utilize services from companies such as WuXi Biologics, possibly due to cost considerations, there is a prevailing belief within the industry that the BioSecure Act will likely be enacted. This legislation would necessitate a shift for U.S.-based customers to domestic alternatives, further opening opportunities for Avid Bioservices to expand its client base.

The analyst’s note elaborated on these insights, underlining the reasons for the sustained Overweight rating and the unchanged price target for Avid Bioservices’ shares. The company’s direction and potential for growth in the upcoming quarters remain a focal point for investors watching the biopharmaceutical services sector.

In other recent news, Avid Bioservices reported mixed financial results for the first quarter of fiscal year 2025. The company saw a 6% revenue increase to $40.2 million, largely fueled by higher process development revenues. However, it also faced a net loss of $5.5 million and an increase in SG&A expenses. Despite these challenges, the company secured $66 million in new project agreements, contributing to a record backlog of $219 million.

Avid Bioservices also anticipates growth in adjusted EBITDA and margins, with a potential 40% to 60% increase in incremental revenue. The company remains optimistic about its future, despite a long sales cycle with large pharma clients and challenges in the cell and gene therapy sector. The majority of new projects came from new customers, indicating a diversifying client base.

These developments underscore the company’s resilience amid a dynamic industry landscape. While the company’s net loss widened and SG&A expenses increased, it continues to secure new agreements and diversify its customer base, demonstrating its commitment to growth.

InvestingPro Insights

Recent InvestingPro data provides additional context to Avid Bioservices’ (NASDAQ:CDMO) financial position and market performance. The company’s market capitalization stands at $723.44 million, reflecting its current market valuation. Despite the positive analyst outlook, InvestingPro Tips highlight that Avid Bioservices is not currently profitable, with a negative P/E ratio of -5. This aligns with the company’s focus on growth and expansion in the CDMO space, as discussed in the analyst’s report.

Interestingly, CDMO has shown strong market performance, with a 58.82% price return over the last three months and a 69.25% return over the past six months. This robust stock performance supports the analyst’s optimistic stance and may reflect investor confidence in the company’s potential to capitalize on industry trends, such as the possible enactment of the BioSecure Act.

However, investors should note that the company’s Price to Book ratio is relatively high at 12.34, which an InvestingPro Tip flags as “trading at a high Price / Book multiple.” This valuation metric suggests that investors are pricing in significant future growth expectations, aligning with the analyst’s view on the company’s revenue prospects.

For readers interested in a more comprehensive analysis, InvestingPro offers additional tips and insights, with 7 more tips available for Avid Bioservices on the platform.

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