On Tuesday, BTIG adjusted its outlook on CareDx, Inc (NASDAQ:CDNA), reducing the price target to $35 from the previous $40, while maintaining a Buy rating on the stock.
The firm's analyst noted that CareDx matched its third-quarter revenue expectations with $83 million, which was $3 million above Wall Street predictions. Furthermore, the company increased its revenue guidance for the fiscal year 2024 by $5 million at the midpoint.
The management of CareDx clarified that while the 2027 financial target of $500 million revenue, suggesting a 15% compound annual growth rate (CAGR), was established, the growth is expected to start closer to the low teens in 2025 and then expand to the high teens by 2027.
This growth trajectory is considered reasonable as CareDx is anticipated to benefit from an increase in surveillance testing in the second half of 2025. This comes after 10 transplant centers have recently implemented new surveillance protocols with CareDx, although it may take two to three quarters for the impact of these new protocols to manifest.
The timing of the final Local Coverage Determination (LCD) from the Centers for Medicare & Medicaid Services (CMS) remains uncertain for CareDx. However, the analyst expressed a belief that any final LCD, if issued, would likely have a positive effect on the transplant industry and CareDx in particular.
In light of these developments, BTIG has raised its estimates to align with the management's financial targets. The firm mentioned that the shares of CareDx have seen a pullback of approximately 20% since the company's analyst day, suggesting that this could be an attractive entry point for investors who have been hesitant to invest. Despite the lowered price target, the firm's reiteration of the Buy rating reflects continued confidence in CareDx's market position and growth prospects.
In other recent news, CareDx reported its Q3 revenue surpassed expectations, with total revenues projected between $82 million and $83 million, marking an approximate 23% YoY growth.
This growth was primarily driven by CareDx's testing services, projected to bring in $60 million to $61 million, marking a 26% increase YoY. The company has also entered a strategic partnership with Dovetail Genomics, aiming to improve donor-recipient matching in organ and stem cell transplants.
H.C. Wainwright reaffirmed a Neutral rating on CareDx following these robust financial results. Meanwhile, BTIG upgraded CareDx from Neutral to Buy, after the Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) concluded their investigations into CareDx without pursuing any charges.
CareDx has also announced the appointment of Jing Huang as Chief Data and AI Officer, and expanded its leadership team with the appointment of Keith Kennedy as Chief Operating Officer, Jessica Meng as Chief Commercial Officer, and Marica Grskovic as Chief Strategy Officer. These recent developments reflect the continued growth and strategic direction of CareDx.
InvestingPro Insights
CareDx's recent financial performance and market position are reflected in several key metrics from InvestingPro. The company's revenue for the last twelve months as of Q2 2024 stands at $297.08 million, with a notable quarterly revenue growth of 31.26% in Q2 2024. This aligns with the company's increased revenue guidance mentioned in the article and supports the analyst's positive outlook.
InvestingPro Tips highlight that CareDx's net income is expected to grow this year, and analysts predict the company will be profitable this year. These projections are consistent with the firm's optimistic stance on CareDx's future performance and the anticipated benefits from increased surveillance testing.
The stock's recent performance has been volatile, with a significant 135.91% price return over the last six months and a 263.39% return over the past year. This volatility and strong recent performance may explain why BTIG views the recent pullback as a potential attractive entry point for investors.
For readers interested in a deeper analysis, InvestingPro offers 12 additional tips for CareDx, providing a more comprehensive view of the company's financial health and market position.
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