Can Hologic, Inc. Shares Fly Above $25?

Does this analyst make a good case? Or is it just more noise from Wall Street?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Apr 24, 2014 at 3:58PM
Health Care

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Hologic (NASDAQ:HOLX) gained about 2% on Wednesday after BTIG initiated coverage on the medical imaging technologist with a buy rating.

So what: Along with the bullish call, analyst Sean Lavin planted a price target of $26 on the stock, representing about 27% worth of upside to yesterday's close. So while momentum traders might be turned off by Hologic's price sluggishness in recent months, Lavin's call could reflect a growing sense on Wall Street that its prospects are becoming too cheap to pass up.

Now what: According to BTIG, Hologic's risk/reward trade-off is particularly attractive at this point. "If Hologic can maintain flat to slightly down revenue and management follows its plan to pay down debt and buy back shares, EPS growth is nearly automatic," said Lavin. "As earnings growth shows up, a higher multiple should follow. While ThinPrep declines do worry us, we see expectations as very achievable given expected strong growth in the new 3D mammogram and MyoSure products." When you couple that upbeat outlook with Hologic's cheapish forward P/E of 13, it's tough to disagree with BTIG's bullishness.