Just a few weeks ago we reported that equity research organisation Berenberg had changed its position on Abcam shares on the back of new CiteAb data, moving to BUY after downgrading the company just three months ago.

Today we are taking a deeper look at Abcam’s shares ahead of the company’s full-year results being published next week, and have reached out to a number of other analysts to get their opinions.

Berenberg is not the only company to have confidence in Abcam, with RBC Securities also rating Abcam as BUY.

However, the picture is mixed overall, with Numis Securities, Peel Hunt and Stifel all recommending HOLD and Panmure Gordon & Co saying SELL.

Julie Simmonds, Executive Director of Equity Research for Panmure Gordon & Co, stated back in June that “we retain our SELL rating as the rating remains too rich in our view, driven primarily by the strong performance from US peers. We believe this is unjustified given Abcam’s growth rate and the structural changes underway.”

Rhys Williams in our product management team caught up with Julie this week, and she reiterated: “The recommendation is still a SELL driven by my issues over valuation”. In reference to next week’s full year results, Julie said “In our view Abcam remains significantly overvalued, trading at a 25% premium to laboratory supply peers, and on a par with Illumina, despite the latter’s significantly higher growth rate. To justify the rating we believe the results need to give more clarity on the potential of the ‘Abcam Inside’ programs, both in timing and value. Currently the potential for a mismatch of expectations and results is high.”

Rhys also spoke to James Mainwaring, Healthcare Equity Research Analyst for Stifel, which has a HOLD recommendation for Abcam, with an expectation of a total return between -5% and 10% over the next 12 months.

James reports that Abcam shows “strong underlying growth but dampened by FX headwinds in 2H18.” He adds that “custom products and licensing revenue saw very strong growth of 17.5%, but only accounts for 7% of revenues currently, while solid growth of 10% was seen across all the catalogue product categories”.

The solid growth Abcam are seeing in their catalogue product categories is supported by our  market data here at CiteAb, which suggests they are gaining share in multiple markets. However Abcam’s revenues and gross margin were slightly lower than Stifel analysts expected.

Stifel analysts are wary of Abcam’s valuation, with James reporting that “The justification of valuation continues to be challenging – however, our target price methodology still leads us to maintain our HOLD rating.”

Numis Securities recently downgraded its recommendation from BUY to HOLD, with Stefan Hamill, Analyst in Healthcare and Life Sciences updating us on his recommendation after he used CiteAb data back in 2015, whilst at Peel Hunt, to support a BUY call on Abcam.

Stefan reported back in April 2018 that: “Abcam’s efforts to continually improve its competitive advantages are relentless, and investments in its big data and analytics capabilities and new ERP should drive further share gains. Also, it is now seeking to exploit its globally leading antibody tech/capabilities to capture value from numerous Abcam Inside antibodies that are gradually starting to impact the much larger antibody diagnostics and, ultimately, antibody therapeutics end markets.”

On Abcam’s growth prospects and valuation, Stefan said “We see more share to go for in its core antibody and related adjacent markets such as immunoassays driving double-digit revenue CAGR (CER) over the next three years. . . . Though Abcam remains a HOLD, we see a share that can reliably grow to over £16 over three years as attractive in this market and would use any weakness to increase holdings.”

In Numis Securities’ Trading Update from July 2018, Stefan said: “Though some of the H2 revenues are likely to have been lumpy milestones, this may indicate the emergence of a new fourth double-digit growth engine in the business alongside RabMAbs, kits and China. With less detail in today’s statement (referring to Abcam’s Full Year Trading Update on 12 July 2018), we await further colour on the makeup and sustainability of this growth at the prelims on 10th September”. Numis Securities reiterate their HOLD recommendation. It will be interesting to see how Abcam’s full-year results next week affects their forecasts.

So overall, a very mixed picture for Abcam at this point, and it’s interesting to note how different analysts use CiteAb’s data to reach sometimes quite different conclusions.

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– Katrina and the CiteAb team