On Tuesday, RBC (TSX:RY) Capital Markets adjusted its outlook on Avid Bioservices (NASDAQ:CDMO), a contract development and manufacturing organization (CDMO), by raising the price target to $8.00 from the previous $7.00. The firm maintained its Outperform rating on the stock.
The increase in the price target follows the company's full third-quarter results, which were released on April 24, 2023. During the release, Avid Bioservices also reaffirmed its guidance for the fiscal year 2024. The recent conference call provided mainly qualitative updates, as the management chose not to comment on the fourth-quarter-to-date booking trends due to the quarter ending on April 30.
Management did, however, note positive indicators in the industry, including an uptick in biotech funding and potential shifts in market share. They also mentioned a growing interest from large pharmaceutical companies, which is seen as a positive sign for the fourth-quarter bookings outlook.
Avid Bioservices' management highlighted an increasing amount of early-phase work recently contracted, in addition to the progression of its later-stage engagements. This mix is expected to help stabilize the near-term to mid-term backlog conversion, which is a key component of the company's business model and future revenue stability.
The raised price target to $8 reflects these developments and the company's potential to capitalize on the improving conditions within the biotech sector.
InvestingPro Insights
Following the optimistic outlook from RBC Capital Markets on Avid Bioservices, current data from InvestingPro shows a mixed financial landscape for the company. With a market capitalization of approximately $479.91 million and a negative P/E ratio of -27.51, investors are pricing in the challenges faced by the company. This is further evidenced by a slight revenue decline of -2.81% over the last twelve months as of Q3 2024, as well as a gross profit margin of 7.47%, which indicates struggles with profitability.
Despite these challenges, Avid Bioservices has experienced significant stock price returns, with a 13.17% increase over the last week and a 12.84% increase over the last month. This could suggest a growing investor confidence in the company's ability to turn around its financial performance. Moreover, an InvestingPro Tip highlights that analysts do not anticipate the company will be profitable this year, which is an important consideration for potential investors.
For those looking to delve deeper into Avid Bioservices' financial health, InvestingPro offers additional insights and metrics. There are 8 more InvestingPro Tips available that can provide a more comprehensive understanding of the company's performance and outlook. To gain access to these valuable tips, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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