The genomic revolution is upon us, but you wouldn't know it just by looking at the share prices of these three stocks. Shares of Fulgent Genetics (FLGT 2.73%), Amyris (AMRS -0.32%), and Pacific Biosciences of California (PACB -1.04%) have been absolutely hammered over the past several months.
Wall Street analysts who get paid to pay attention to these businesses think the stock market beatings they've received are totally unjustified. Here's why the price targets they set for these genomics stocks suggest gains of 60% or more just up ahead.
Fulgent Genetics stock crashed this spring and it's still around 54% below a price it reached in February. Analysts on Wall Street who follow the stock expect it to rebound and continue climbing. The consensus price target for Fulgent Genetics right now represents a 67% premium over its recent price.
Exploding sales of COVID-19 tests caused shares of this genetic testing stock to soar in 2020. Uncertainty around future COVID-19 test demand, though, has applied a lot of downward pressure.
Fulgent reported $154 million in total revenue in the second quarter this year. That was a big gain over the second quarter of 2020 but a terrifying 57% below total revenue during the first quarter of 2021.
The dramatic loss of revenue overshadows the strength of Fulgent Genetics' underlying business. Impressive execution while COVID-19 testing demand exploded last year proves this business operates like a well-oiled machine. It also allowed the company to grow its cash cushion to $777 million at the end of June and this figure has probably grown past $1 billion already.
The market has beaten Fulgent Genetics market cap down to just $2.5 billion at the moment. With a big cash cushion and growing sales of next-generation sequencing products, this stock looks like a bargain now.
Amyris shares are down around 37% from an all-time high point they reached this spring. The average Wall Street analyst who follows the company thinks it's heavily underappreciated at this level. The consensus price target on the synthetic biology stalwart is around 60% above its recent price.
Amyris stock has been tumbling for the past six months thanks partly to some drama involving a pair of unrelated synthetic biology start-ups, Zymergen and Ginkgo Bioworks. Luckily, Ginkgo Bioworks' disturbing lack of profitability and Zymergen's lack of top-line revenue aren't the sort of problems Amyris investors need to worry about. Amyris expects more than $400 million in sales and positive earnings before interest, taxes, depreciation, and amortization (EBITDA) this year.
So far, Zymergen and Ginkgo Bioworks are simply developing microorganisms that excrete high-value ingredients for third parties. Unfortunately, this service is useless to a third party that doesn't have synthetic biology manufacturing capacity. Right now, Amyris is really the only company on earth that can reliably produce new synthetic biology products at a profit.
Years ago, Amyris discovered the hard way that third parties can't be relied upon to drive economies of scale. Fortunately, the health and beauty brands that the company has launched on its own can. The Biossance brand of high squalene content moisturizers the company launched in 2017 is a hit. Half a dozen new brands that have launched since 2019 could eventually generate nine-figure annual revenue streams too.
Pacific Biosciences of California
Pacific Biosciences shares also spiked in 2020 and into 2021, but they're down by around 49% since reaching a peak this February. Analysts on Wall Street who follow this pioneer of long-read DNA sequencing expect big gains around the corner. The consensus price target for this to genomics stock suggests it could soar 76% above its recent price.
Shares of the company most commonly called PacBio tumbled this spring along with prices of most high-profile tech businesses that currently lack sustainable profits. Investors fleeing for the exits picked up their pace this September when the company issued millions of new shares to acquire Omniome, another genetic sequencing company that produces a high-accuracy short-read sequencing platform.
PacBio's claim to fame is its highly accurate long-read DNA sequencing technology. The integration of Omniome's short-read platform is supposed to offer customers the best of both worlds and significantly expand PacBio's addressable market in the process.
A lack of profitability at the moment makes PacBio look like the most dangerous stock on this list. If you do bite make sure it's a small part of a well-diversified portfolio.