On Thursday, Berenberg maintained a Buy rating on Oxford Nanopore Technologies PLC (LON:ONT:LN) (OTC: ONTTF) stock while revising the company's price target down to GBP2.82 from GBP3.50.
The adjustment reflects the impact of sustained weakness in life sciences funding, which has significantly affected the valuations of genomics companies that are not yet profitable.
Oxford Nanopore, known for its innovative gene-sequencing technology, has seen its valuation decline by approximately 80% since January 2022. This downturn is more pronounced than the broader sector's average de-rating of about 67% over the same period. The downward pressure on valuations has been attributed to a challenging funding environment for life sciences ventures.
Despite these market conditions, the management team at Oxford Nanopore is reported to have realistic expectations regarding life sciences funding. Moreover, the company is actively working to diversify its sales and research and development efforts. These strategies are aimed at targeting applied markets, which tend to be larger and offer more predictable revenue streams.
The efforts to pivot towards these applied markets have started to yield positive results, as indicated by the firm's commentary. Oxford Nanopore's proactive measures in adjusting its business focus are seen as a strategic move to mitigate the impact of the current funding landscape and position the company for future growth.
In summary, while the revised price target represents a more conservative valuation of Oxford Nanopore in light of the funding challenges, Berenberg's continued Buy rating suggests a belief in the company's long-term potential and the effectiveness of its strategic initiatives.
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