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Why GenMark Diagnostics, Inc. Is Soaring Today

By Brian Feroldi – Sep 16, 2016 at 12:58PM

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Shares jump in response to an analyst upgrade.

Image source: Getty Images.

What happened

Shares of GenMark Diagnostics (GNMK), a molecular-diagnostics company, are on the move today. The markets are bidding the company's stock up more than 18% as of 11:15 a.m. EDT in response to GenMark receiving a upgrade from an analyst.

So what

GenMark's investors can thank Doug Schenkel, an analyst at Cowen, for the company's positive price action. 

Schenkel said that his firm had previously downgraded GenMark due to delays related to regulatory submissions of its next-generation testing product, the ePlex system. However, those concerns have since been alleviated, giving Schenkel conviction that the company is on target to launch the ePlex system in the U.S. in early 2017. As a result, Schenkel raised his rating on the stock to "outperform" and set a price target of $17.

That's quite a bullish call. Yesterday this stock closed at $8.82, so the new price target calls for an almost doubling of the share price.

The upbeat outlook has certainly caught the market's attention, which is why shares are up so much today.

Now what

GenMark's ePlex system looks like it could be the real deal. The company is saying that the new system will be very easy to use and provide far faster testing results than other systems, which is an attractive combination that could catch the attention of many healthcare providers.

Of course, the company will certainly face its fair share of competition if it can eventually bring the ePlex system to market. One name for investors to keep an eye on is Cepheid (NASDAQ: CPHD), another molecular diagnostics company, which was recently acquired by Danaher (DHR -1.47%) in a $4 billion deal. Danaher already has a big diagnostic business with a worldwide network and reputation for excellence, so it's possible that Cepheid's market share could continue to grow in response to the buyout. After all, Danaher has a long history of acquiring other businesses and then making them even more competitive, so this is a company that GenMark's investors need to keep tabs on. 

Still, the ePlex system looks like it offers enough advantages to hold its own once it comes to market, so GenMark's revenue could be poised to soar in the years ahead. However, since this company is still firmly in the red, and regulatory success for the ePlex is far from guaranteed, I'd advise potential investors to proceed with caution.

Brian Feroldi has no position in any stocks mentioned. Like this article? Follow him on Twitter where he goes by the handle @Longtermmindset or connect with him on LinkedIn to see more articles like this.

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GenMark Diagnostics, Inc. Stock Quote
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