RBC Capital Markets lowers target price on Abcam

by | May 10, 2022

Analysts at RBC Capital Markets lowered their target price on protein research tools producer Abcam from 1,950.0p to 1,700.0p on Tuesday in order to better reflect share price movements at competitors.
RBC said industry commentary as a whole was largely positive, except in China, noting that relevant commentary from many of its life science tools peers indicated that the academic funding environment remained “good”, with most companies not seeing issues around biopharma funding either. However, in China, the first quarter of the year did see an impact from lockdowns, something that was also expected to weigh on Q2.

The Canadian bank stated it was updating its model on Abcam following its full-year results in March, recent FX tailwinds, and the Chinese lockdowns, with its revenue forecasts now 2-3% higher, almost entirely due to FX, with higher initial underlying

growth expectations tempered by lower expectations for its operations in China in the first half.

RBC also noted that EPS changes range from -1% to +3% for 2022-2024E. However, it said a change in accounting to remove share-based payments from underlying earnings meant that the nominal change was actually much greater at approximately 15-19%.

“Recent commentary from Q1 results of life science tools peers is largely positive, with the exception being on China lockdowns. We adjust down our China growth expectations for H1, but this is more than offset by recent GBP weakness,” said RBC.

“Life science tools stocks have devalued over the last few months, and PEGs are closer to 2.5x (from 3.0x previously). Applying the same weighted scenario methodology as before, and using earnings estimates that include core SBP payments, our price target moves to £17.00 from £19.50.”

Reporting by Iain Gilbert at Sharecast.com

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