What happened
Shares of the contract development and manufacturing organization Avid Bioservices (CDMO 4.21%) were up by a healthy 34% on heavy volume as of 11 a.m. ET Tuesday. The biotech's stock is marching northward today in response to its fiscal 2023 third-quarter earnings report released yesterday afternoon.
Avid modestly topped Wall Street's consensus top- and bottom-line estimates for the three-month period. However, the real needle-moving event appears to be the steady progress in the company's ongoing expansion efforts.
So what
Before the end of September, Avid expects to have a total of three major expansion projects completed:
- Mammalian cell manufacturing (already open).
- Process development facility expansions (expected to be completed by the end of this month).
- Cell and gene therapy facility expansion (by the end of September).
What's the big deal? Avid's stock lost over half of its value last year due to concerns about demand for bio-manufacturing in a high-inflation and high-interest-rate environment. That concern was clearly overblown in light of Avid's latest financial results and strong near-term outlook. During the latest quarter, for instance, Avid booked $67 million in new business. This spike seems to have given management the confidence to move forward with these value-creating expansion projects.
Now what
Is Avid stock a buy on this news? After this double-digit move higher, the bio-manufacturing company's stock is now trading at 6.5 times 2024 estimated sales. That's not a super rich premium in the biotechnology space, but it certainly isn't low, either. Investors may want to carefully consider the company's long-term value proposition before buying shares at these levels.
