Tuesday saw RBC Capital Markets adjust its outlook on Avid Bioservices (NASDAQ:CDMO), a dedicated contract development and manufacturing organization (CDMO). The firm raised the price target to $12.00 from the previous $8.00 while maintaining an Outperform rating on the stock.
The adjustment came despite Avid Bioservices reporting revenue and EBITDA that fell short of expectations. The company's bookings, however, significantly exceeded analyst estimates, reaching $66 million against RBC Capital's forecast of $36 million and surpassing Avid's own last twelve months (LTM) average of $35.5 million.
The positive performance in bookings was attributed to a diverse set of factors, including new customer acquisitions, ongoing projects in both early and late stages of development, and the securing of a commercial mandate.
The company also indicated that the quarter saw a higher proportion of early-stage work, which is expected to slightly increase near-term (NT) burn rates. This development is seen as potentially enhancing the visibility of the company's reaffirmed revenue guidance for the fiscal year 2025, which is set between $160 million and $168 million. The consensus forecast for the company's 2025 revenue was at $163 million.
The raised price target reflects the analyst's optimism about Avid Bioservices' growing momentum in bookings. This momentum is viewed as a positive indicator for the company's revenue guidance and its long-term growth trajectory. The analyst's comments underscore the belief that the current mix of early-stage work could contribute to a more solid foundation for the company's future financial performance.
In other recent news, Avid Bioservices reported record revenues for the fourth fiscal quarter of 2024, exceeding expectations by about 2%, and reaching $43 million. This was an 8% increase year-over-year, despite a 6% decrease in yearly revenues.
The company also provided optimistic revenue guidance for fiscal year 2025, projecting revenues between $160 million and $168 million, suggesting significant year-over-year growth.
In a recent amendment to its Deferred Compensation Plan, Avid Bioservices' Board approved a modification that mandates the distribution of all amounts from the Company Stock Fund and deferrals of Equity Awards in the form of company stock. This change aligns the interests of the plan's participants more closely with those of the company's shareholders.
KeyBanc Capital Markets and RBC Capital maintained their Overweight and Outperform ratings on Avid Bioservices stock respectively, despite lower order intake and EBITDA shortfall. Both firms emphasized the importance of bookings in evaluating the company's future performance and outlook.
These recent developments are attributed to the launch of the company's new cell and gene therapy manufacturing facility and a trend towards onshoring drug manufacturing in the U.S. Avid Bioservices expects margins to improve as capacity utilization increases and anticipates a pickup in business in the coming months, with approximately $80 million in interest and activity in their pipeline.
InvestingPro Insights
As RBC Capital Markets updates its outlook on Avid Bioservices, it's worth noting several key insights from InvestingPro that may be relevant for investors considering the company's stock. Avid Bioservices' market capitalization currently stands at approximately $570.97 million, reflecting investor sentiment and the company's scale in the competitive CDMO landscape. Despite a recent price uptick of 33.38% over the last six months, the stock has experienced a significant decline of 8.02% in the past week, which may indicate recent market volatility or investor reactions to the company's financial performance.
InvestingPro Tips suggest caution with Avid Bioservices, as analysts do not expect the company to be profitable this year. The company's gross profit margins are considered weak at 5.23%, and it has been unprofitable over the last twelve months. Additionally, the stock is trading at a high Price/Book multiple of 9.38, which could suggest it is overvalued relative to its book value, particularly in the context of its current lack of profitability.
However, the company has shown some positive signs with a quarterly revenue growth of 7.98% in Q4 2024, indicating potential resilience or recovery. For those interested in a deeper dive, there are over six additional InvestingPro Tips available for Avid Bioservices, providing further analysis and context for these financial metrics at InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.