IDEXX Laboratories (IDXX) was downgraded to ‘Neutral’ from ‘Overweight’ with a price target of $525 at Piper Sandler on Tuesday due to softness in pet owner visits and wellness spending that could extend into 2025.
Analysts at Piper Sandler still do see IDEXX as a compelling long-term investment however.
“While we maintain our long-term outlook that diagnostics will grow at 8-9% a year for a decade and that IDEXX will take a disproportionate amount of diagnostics growth, the overall near-term macroeconomics present a potential for another year of growth below long-term trends,” analysts at Piper Sandler wrote in a note to clients.
With volume and utilization unlikely to improve in 2024, and with the stock trading around Piper Sandler’s price target and up 35% since October lows, a downgrade was in order.
“We think the stock needs volume upside to move higher from here. This is something we're not seeing in the market,” analysts commented.
Lower utilization in 2024 is however not expected to impact clinical care visits or diagnostics utilization in clinical care.
“We see headwinds from extended length between wellness appointments and pet owners generally reducing levels of preventative care. To be clear, we're not referring to a slowing of diagnostics utilization as much as a reduction in the speed at which utilization is increasing.”
Following the downgrade, IDEXX stock was trading down 2.06% at $521.12 at midday Tuesday.