Genetic Testing And FDA Approval Provides Momentum For Affymetrix!
STOCK TRADE: Buy AFFX at market price (approx. $9.30), good for the day. Place a protective stop-loss at $7.00 and a pre-determined sell at $15.00.
by Ian Harvey
January 23, 2014
Genetic testing designed to identify all sorts of potential diseases, conditions and potential maladies is a field that's held both promise and disappointment for many biotech companies over the years.
Fits and starts are common in the space, and approval from government agencies that regulate the sector is hard to come by. So, when an established company in the industry does get that coveted approval, you had better take notice, as it can mean some big profits for traders willing to take the ride.
In the case of genetic test maker Affymetrix, Inc. (NASDAQ: AFFX), the stock is riding high courtesy of the latest approval from the U.S. Food and Drug Administration. On Friday, the FDA authorized marketing of the company's CytoScan Dx Assay, a test that's designed to detect chromosomal variations in children that may be responsible for developmental delays and other intellectual disabilities.
The Affymetrix CytoScan DX can analyze a blood sample and scan the entire human genome to detect both large and small chromosomal changes. This is significant because many developmental disabilities such as Down syndrome and DiGeorge syndrome are thought to be associated with chromosomal variations.
In the FDA's own press release approving the Affymetrix test, Alberto Gutierrez, Ph.D., director of the Office of In Vitro Diagnostics and Radiological Health, said this new tool should help "health care providers and parents to intervene with appropriate care and support for the child."
For AFFX, this news represents the latest positive development driving traders into the stock.
Affymetrix, Inc. (Affymetrix) is engaged in the development, manufacture, sale and service of consumables and systems for genetic analysis in the life sciences and clinical healthcare markets.
Affymetrix has developed its GeneChip system and related microarray technology as a platform for acquiring, analyzing and managing genetic information.
The Company offers a line of products for two principal applications: genotyping and gene expression. Related microarray technology also offered by Affymetrix includes licenses for fabricating, scanning, collecting and analyzing results from complementary technologies.
The Company also sells some of its products through life science supply specialists acting as authorized distributors in Latin America, India, the Middle East and Asia Pacific regions, including China.
In October 2013, StoneCalibre announced that the completion of the acquisition of Anatrace, a part of Affymetrix, Inc.
|Current P/E Ratio (ttm)||-|
|Relative P/E vs. SPX||-|
|Earnings Per Share (USD) (ttm)||-0.4830|
|Est. EPS (USD) (12/2013)||0.1340|
|Est. PEG Ratio||2.1054|
|Market Cap (M USD)||669.55|
|Shares Outstanding (M)||71.92|
|30 Day Average Volume||1,249,456|
|Dividend Indicated Gross Yield||-%|
|5 Year Dividend Growth||-|
|Next Earnings Announcement||02/05/2014|
Shares of AFFX stayed flat to close yesterday at $9.31. Affymetrix has a 1-year low of $3.22 and a 1-year high of $9.80. The stock’s 50-day moving average is $8.48 and its 200-day moving average is $5.82.
Affymetrix last posted its quarterly earnings results on Wednesday, October 30th. The company reported $0.05 earnings per share for the quarter, beating the analysts’ consensus estimate of $0.02 by $0.03. The company had revenue of $80.40 million for the quarter, compared to the consensus estimate of $78.95 million. During the same quarter in the prior year, the company posted ($0.03) earnings per share. The company’s quarterly revenue was up 1.0% on a year-over-year basis. Analysts expect that Affymetrix will post $0.12 EPS for the current fiscal year.
Excellent Fourth Quarter Preliminary Results and Third Quarter Results
AFFX announced its preliminary revenue for the fourth quarter of 2013, on January 7, 2014. The company expects total revenue of approximately $91 million (including a one-time licensing payment of $5.3 million) for the quarter and total revenue of approximately $329 million for the fiscal year.
Quarterly sales reflect a 7.8% increase from the year-ago level of $84.4 million. Further, both the quarterly and annual estimates were ahead of Zacks Consensus Estimates of $85 million and $322 million, respectively.
Earlier on October 30, 2013, the company reported its third quarter results. Non-GAAP net income was $0.05 per share, compared to a net loss of $0.03 per share, for the same quarter of 2012. The results handily beat the Zacks Consensus Estimate of $0.2 per share. Revenues rose 0.9% to $80.4 million, ahead of the Zacks Consensus Estimate of $79 million.
Positive Earnings Estimates Revisions
As a result of much better than expected operating/preliminary results, analysts have revised their earnings estimates for the company in the past few weeks.
Zacks Consensus Estimates for the current quarter and the current year now stand at $0.06 per share and $0.14 per share respectively, up from $0.04 per share and $0.11 per share, 60 days ago.
On the back of the positive guidance, Affymetrix was upgraded to a Zacks Rank #1 (Strong Buy) on January 8th.
The company also earned a (longer-term) Zacks recommendation of “Outperform,” based on its improved prospects.
However, Morgan Stanley downgraded shares of Affymetrix from an equal weight rating to an underweight rating in a research note released on Monday morning, 6th January. They currently have $7.20 target price on the stock.
But Affymetrix has been the subject of a number of other recent research reports which are more positive:-
• Analysts at Zacks reiterated an outperform rating on shares of Affymetrix in a research note to investors on Monday, December 2nd. They now have a $10.00 price target on the stock.
• Separately, analysts at Mizuho raised their price target on shares of Affymetrix from $10.00 to $12.00 in a research note to investors on Friday, November 22nd. They now have a buy rating on the stock.
• Finally, analysts at UBS AG raised their price target on shares of Affymetrix from $4.00 to $7.00 in a research note to investors on Thursday, October 31st. They now have a neutral rating on the stock.
Two research analysts have rated the stock with a sell rating, two have given a hold rating and four have issued a buy rating to the stock. The stock presently has a consensus rating of Hold and a consensus target price of $8.53.
Affymetrix still has about two more weeks before the official fourth-quarter numbers are released, as the company is slated to report on Feb. 5. It is suspected that the positive combination of what should be a strong quarterly report and the new approval of the CytoScan DX Assay test will cause money to continue flowing into the shares for the next two to three weeks, and likely well beyond.
With the shares now trading just below their 52-week high, the momentum is with AFFX, and that means the shares could be primed for another big leg higher. If the Feb. 5 release comes in slightly better than expected, traders who take a position at current levels could be well rewarded.
Therefore, based on the facts above the following stock trade is recommended…..
**STOCK TRADE: Buy AFFX at market price (approx. $9.30), good for the day. Place a protective stop-loss at $7.00 and a pre-determined sell at $15.00.