On Jun 26, we upgraded genetic devices maker
) to Neutral from Underperform, as we believe that the company
has reasonable upside potential going forward, despite
disappointing first-quarter results.
Why the Upgrade?
Affymetrix posted first-quarter 2013 adjusted loss per share of 1
cent, wider than the Zacks Consensus Estimate of break-even
earnings. However, it was narrower than the year-ago adjusted
loss per share of 3 cents. Revenues increased 19.5% (including
the eBioscience acquisition) year over year to $77.9 million but
were 4.9%.lower than the Zacks Consensus Estimate of $82 million.
Following the release of the first-quarter results, the Zacks
Consensus Estimate for 2013 declined to a loss of 1 cent per
share from earnings of 5 cents per share. Moreover, the Zacks
Consensus Estimate of a loss for 2014 has also declined (down 50%
to 6 cents per share) significantly.
However, we believe that Affymetrix is ready for a turn around
and the worst days are over for the company. In the face of
declining demand for Affymetrix' flagship GeneChip Expression
products, management's strategy to transform into a company with
a broad reach in the high-growth markets for translational
medicine, molecular diagnostics and applied markets is
New products, acquisitions, strategic agreements should propel
growth going forward. Additionally, the company's restructuring
and debt reduction efforts should boost margins and
Meanwhile, we are aware of the fact that Affymetrix faces intense
competition and pricing pressure across its core markets and is
exposed to tight global academic spending environment. Hence, we
choose to remain on the sidelines regarding Affymetrix, as
evidenced by its Zacks Rank #3 (Hold).
Other Stocks to Consider
Other stocks in the Medical-Biomed/Gene industry that are
currently performing well include
). All these companies carry a Zacks Rank #1 (Strong
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