On Thursday, Goldman Sachs (NYSE:GS) adjusted its stance on Maravai LifeSciences Holdings Inc. (NASDAQ:MRVI), downgrading the stock from Neutral to Sell and reducing its price target to $4.25 from the previous $7.00.
The investment firm's assessment reflects a significant decline in the company's stock performance compared to the broader market, with Maravai's shares falling 55.2% since the last downgrade in May 2023, while the S&P 500 index has returned 47.9%.
The downgrade is attributed to the current spending environment in the pharmaceutical sector, which has seen a shift away from early-stage programs where Maravai predominantly operates. The company's challenges are reflected in its financial metrics, with InvestingPro data showing a 34% revenue decline in the last twelve months and analysts forecasting a further 10% sales decline this year.
Despite recognizing Maravai's long-term growth potential due to the early signs of durability in its Non-Covid mRNA and gRNA program starts, Goldman Sachs anticipates it will take time for the company to achieve the necessary revenue levels to drive substantial operating leverage.
Goldman Sachs notes that Maravai's investments in GMP capacity expansion are expected to support growth in later-stage programs. However, the firm projects that it may take several years for earlier-stage programs to progress through the pipeline and significantly impact the company's revenues. This extended timeline is seen as a factor contributing to the stock's downgrade.
The analysis also points to Maravai's challenges in maintaining consistent EBITDA margins relative to its peers. In a market that favors high-quality names, the company's fluctuating margins are seen as a disadvantage, leading to the analyst's decision to adopt a bearish outlook on the stock.
In summary, while Maravai LifeSciences has potential for growth in its non-Covid programs, Goldman Sachs believes that the company's path to improved financial performance will be prolonged, impacting its attractiveness to investors in the current market climate.
InvestingPro analysis reveals the company maintains a healthy current ratio of 10.74 and operates with moderate debt levels, though it currently trades at an elevated EBITDA multiple. For deeper insights into Maravai's financial health and detailed valuation metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Maravai LifeSciences reported mixed Q3 results, with revenues totaling $65 million, slightly under expectations due to shifts in program timing and reduced demand. Despite a noncash goodwill impairment charge of $154 million related to the TriLink business unit, the company remains optimistic about long-term growth, fueled by increased activity in non-COVID mRNA clinical trials and a robust pipeline of innovations.
The company also marked significant developments, including the initiation of customer builds at the new Flanders 2 facility and a collaboration to launch CleanScribe RNA Polymerase.
Wolfe Research initiated coverage on Maravai LifeSciences shares with a Peerperform rating, highlighting positive aspects such as its best-in-class products and attractive profit margins. The firm also noted that Maravai LifeSciences' main challenge lies in the mRNA biologics and vaccines sector, which is perceived as less promising compared to other areas of bioprocessing.
In addition, Maravai LifeSciences revised its 2024 revenue guidance to between $255 million and $265 million, and its adjusted EBITDA margin forecast to 16%-18% due to softer market conditions and delayed customer programs. The planned acquisition of Officinae Bio, set to close in early 2025, is expected to expand Maravai's precision DNA and RNA services.
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