NeoGenomics Shares Nearing Full Valuation In BTIG's View

Although BTIG’s Sean Lavin sees the current valuation of NeoGenomics, Inc. (NASDAQ: NEO) shares as fair, there do not appear to be sufficient near-term catalysts to drive any significant upside to the stock.

Lavin downgraded the rating on the company from Buy to Hold.

Limited Upside

“The base business continues to trend well and with more clarity around Medicare in 2017, we think downside risk is fairly modest,” the analyst mentioned.

Lavin pointed out that the stock has surged 70 percent in less than a year, and explained that the Buy thesis had been based on continued share gains, as well as stable reimbursement and attractive valuation.

However, all these factors have largely played out through a “transformative” acquisition and improved Medicare reimbursement.

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“We remain positive on the base NEO business and think downside risk is fairly modest. But, we do not see enough NT catalysts to drive meaningful upside from here; and with valuation fair, are less constructive on shares,” Lavin stated.

Q2 Results

NeoGenomics’ Q2 results were marginally ahead of the estimates, with lower volumes being offset by increased reimbursement.

Gross margin declined sequentially during the quarter, while cost per test fell 4 percent, significantly lower than in recent quarters.

According to the BTIG report, “While this was partly due to the timing of integration, mgmt anticipates less benefits here as it will be more focused on customer phasing/retention in the near-term.”

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