When I last reviewed Thermo Fisher (NYSE:TMO) (“Thermo”) my view on the stock was that, while the price wasn’t out of line for other life sciences companies, the longer-term prospective return still wasn’t that great. Since then, sell-side analysts have dutifully kept hiking their price targets, but the shares have flattened out some on worries about the impact of a sharp falloff in COVID-19 testing in 2021.
COVID-19 testing is going to meaningfully decline (or at least I sincerely hope so), but Thermo Fisher has gained significant ground in areas like molecular diagnostics (PCR-based testing in particular) that I don’t believe it is likely to surrender. Moreover, bioproduction remains a very attractive market over the long term. On top of all of that, the company is likely to keep generating $7 billion or more a year in free cash flow, creating huge opportunities for capital deployment.
I have increased my long-term revenue assumptions on the basis of that larger long-term footprint, and I expect mid-single-digit long-term growth even from the elevated starting point of the COVID-19-boosted 2020 numbers. While I can’t call Thermo a “bargain” per se, I do see a more interesting potential return from these levels, and it’s hard not to like the long-term opportunities/markets Thermo serves.
Read the full article here:
Fears Of A Post-Pandemic Hangover Have Weighed On Thermo Fisher's Shares
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