What happened
Shares of contract drug developer AbCellera Biologics (ABCL -3.69%) are down 10% as of 12:04 p.m. ET today, according to data from S&P Global Market Intelligence, following Piper Sandler's lowered price target despite a seemingly strong earnings report.
So what
For the three-month stretch ending March 31, biopharma outfit AbCellera Biologics turned $316.6 million worth of revenue into earnings of $0.54 per share. Both numbers are better than the year-ago comparisons of $202.7 million and $0.37, respectively, although perhaps more important, both numbers topped expectations for sales of $219.5 million and a profit of $0.38 per share. COVID-19 treatments bamlanivimab and bebtelovimab -- manufactured for Eli Lilly (LLY -0.12%) -- accounted for $307 million of the company's Q1 top line.
And there's the rub. While AbCellera Biologics' CEO Carl Hansen is unsurprisingly optimistic about the future, that's a future in which the drugs' combined revenue contribution could fade -- significantly. Bamlanivimab was deemed ineffective against the omicron strain of the coronavirus in January, and while bebtelovimab still has its place in the fight against the ongoing pandemic, interest in combating COVID-19 is waning while the virus itself is evolving. The company still has 84 unique drug developments underway. But nothing said during the conference call led investors to think the analyst community's expectations of a 15% decline in sales this full fiscal year and a 74% dip next year were off target.
Image source: Getty Images.
This may be the key reason Piper Sandler lowered its price target on the stock, according to TheFly.com. Although it maintains its overweight rating of the stock, Piper Sandler dialed its target back from $28 to $21 per share following the company's Q1 report and conference call.
Now what
It's an interesting disconnect. Even with Sandler's lowered target, AbCellera shares are still priced more than 70% below that target, implying nearly a 300% upside.
It would also be naive to ignore the possibility that the stock's current downtrend has taken on a self-sustaining life of its own. Priced as high as $71.91 the day it went public in December of 2020 (in the throes of the pandemic), the stock is at yet another record low of $5.74 today. It wouldn't be out of line to start seeing ABCL as a speculative purchase despite the brewing revenue headwind.
For most investors, though, there are still too many unknowns to tangle with right now, and too much bearish momentum to overcome.
