One of the warning signs for me with stocks is when good news fails to move the shares. GenMark Diagnostics (GNMK) guided to a third-quarter revenue number that was 10% higher than expected, and the shares have done basically nothing on an otherwise good day for the stock market. While gross margin commentary was perhaps a bit soft, the growth in revenue and placements should have otherwise been good news.
At this point, I believe the COVID-19 opportunity is well-understood, and there are still substantial questions as to whether or not the systems installed to meet the surge in COVID-19 testing will remain in regular use once the pandemic fades. That issue may be tested sooner than some expect, as antigen-based testing is likely to grow considerably from here and become the dominant testing approach for COVID-19.
If the market is truly transitioning to a "post-COVID-19" view on GenMark, a forward revenue multiple of around 5x to 6x on 10% to 15% three-year revenue growth seems reasonable. That still leaves upside for GenMark, and this could be a worse-than-average flu season, but I believe upside is now increasingly reliant on the company's ability to show follow-through adoption of the blood culture panels to maintain high levels of utilization and test consumption.
Follow this link to the full article:
Better Guidance Fails To Boost GenMark, As The COVID-19 Story No Longer Surprises
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