Health and Healthcare

Canaccord Genuity Issues Top 5 Diagnostics Picks for 2018

Jon C. Ogg

Published: January 16, 2018 3:01 pm

Last Updated: January 12, 2020 4:26 am

It’s a new year, and the bull market has raged on after the Dow rose 25% and the S&P 500 rose over 19% last year. 24/7 Wall St. has tracked many analyst calls sending their price targets higher and higher in the new year, and even our own initial target price of 26,400 on the Dow (and 2,855 on the S&P 500) now look like absolute baseline numbers rather than annual targets for real upside after what this year’s gains feel like.

Many firms on Wall Street are issuing their top forecast picks for 2018. These may be called top picks, conviction buys, focus lists and so on. Canaccord Genuity’s diagnostics analyst Mark Massaro released his own top picks for 2018. The average pick here is calling for upside of 15% or so, which may not seem overly aggressive for such a strong bull market. That is after big gains in most cases from last year, and the price targets are generally not that much more aggressive than the consensus target prices from Thomson Reuters.

All in all, the firm’s top five picks in the diagnostics space have a combined market cap of over $70 billion.

Exact Sciences Corp. (NASDAQ: EXAS) was listed as a top pick, even if news of its $600 million convertible debt offering at the end of the week caught Canaccord Genuity by surprise. The outstanding preannounced revenue was overshadowed by it, but they believe it has tremendous flexibility. Canaccord Genuity has a Buy rating and a $60 price target (versus a $52.62 prior close).

Exact Sciences has a consensus analyst target price of $58.63 and a 52-week range of $16.95 to $63.60. Its market cap is $6.3 billion.

Illumina Inc. (NASDAQ: ILMN) was a win after preannouncing to the upside and highlighted by outstanding sequencing consumables. The firm sees multiple growth drivers here in a “must own” large cap stock: solid ongoing NovaSeq placements, accelerating consumables growth, accelerating services revenue, liquid biopsies, population sequencing and more. Canaccord Genuity has a Buy rating and $255 price target that is not really that much higher than the $244.72 closing price.

Illumina has a consensus target price of $236.38 and a 52-week range of $156.50 to $248.87. Its market cap is now over $35 billion.

Genomic Health Inc. (NASDAQ: GHDX) is covered with a Buy rating, and the $42 price target (up from $39) implies 20% upside from the current $35.00 stock price. The firm feels that Genomic Health may be for sale and the company has value even if not. In its call, the firm thinks that it can benefit from multiple expansion from improved operational efficiencies and profitability.

Genomic Health has a consensus analyst target of $32.29 and a 52-week range of $26.37 to $37.50. Its market cap is $1.2 billion.

Hologic Inc. (NASDAQ: HOLX) was reiterated as Buy with a $50 price target, implying upside of about 15%. The positive call here is following its strong tax guidance and better than expected numbers. Another driver is a “multiple expansion” driving valuations higher into an earnings acceleration.

Hologic has a consensus target price of $49.06. The 52-week range is $35.76 to $46.80, and the market cap is $12 billion.

Laboratory Corp. of America Holdings (NYSE: LH), or what the rest of us call LabCorp, was another top pick for 2018. Canaccord Genuity has a Buy rating, and the $190 price target implies upside of about 11% from the $171 share price. The firm believes that tax reform will add about $1.00 per share and that there are quite a few reasons to like this stock.

LabCorp has a consensus target price of $178.56 and a 52-week range of $128.00 to $172.43 — with that high hit just this week. LabCorp’s market cap is $17 billion.