On Monday, UBS has downgraded shares of Quidel (NASDAQ:QDEL) Corporation (NASDAQ:QDEL) from Neutral to Sell, significantly reducing the price target to $42 from the previous $70. The firm cites several concerns, including a potential downside to the company's guidance and consensus estimates, limited visibility, and the absence of near-term positive catalysts that could drive the stock price upward.
The downgrade comes amid UBS's expectations of a 6% organic decline in Quidel's performance for 2024, which is more pessimistic than the current market valuation that implies a 3% decline. The firm's analysis suggests that the stock price could face further depreciation as a result. Quidel's guidance for its respiratory and Savanna products is heavily reliant on fourth-quarter performance, and the lack of clarity in the near term is seen as a risk factor that could lead to estimates falling short, with UBS's projections being 18% below the consensus for the full year.
Quidel's testing for respiratory conditions, including COVID, flu, and RSV, is expected to experience a sequential decrease according to UBS's proprietary surveys. Additionally, the postponement of the analyst day event, coupled with a recent CEO transition, has removed what might have been a positive influence on the stock's performance. UBS anticipates that any downward revisions to the company's financial figures are likely to result in a negative reaction in the stock market.
The expected change in revenue composition, with a declining proportion coming from high-margin respiratory products, has led UBS to estimate earnings before interest, taxes, depreciation, and amortization (EBITDA) that is 8% and 14% below the consensus for 2024 and 2025, respectively. This adjustment in EBITDA forecasts further underscores the firm's bearish outlook on Quidel's financial health and stock performance in the coming years.
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