Neutral on Affymetrix - Analyst Blog
May 18 2011 - 11:52AM
Zacks
We maintain our Neutral rating on genetic products maker
Affymetrix (AFFX). The California-based
company posted
a modest profit of $39,000 (or break-even earnings) in
first-quarter fiscal 2011 as a decline in sales was offset by lower
costs. The results matched the Zacks Consensus Estimate.
Revenues dipped 8% year over year, hit by lower product sales,
trailing the Zacks Consensus Estimate. Product revenues were hurt
by lower consumables and instrument sales. Both DNA and RNA sales
fell in the quarter. Despite lower sales,
gross margin improved in the quarter owing to better mix and
reduced costs.
Affymetrix is a leading provider of microarray-based products
and services to the global research community. Along with
Illumina Inc. (ILMN), it is one of the two major
providers of microarray technologies primarily used in the field of
genetic research. The company holds a leading position in the gene
expression products and services market with roughly 50%-54%
share.
Affymetrix is enjoying steady end-user demand for its arrays and
is expanding its customer base through new product launches. The
company broadened its popular Axiom genotyping platform in the
first quarter with the launch of the Axiom Genome-Wide CHB 1 Array
for studying
diseases in Han Chinese populations.
Moreover, Affymetrix is pursuing a number of strategies
(including expansion into new markets and strategic alliances)
aimed at expanding its top line, representing a top priority in
2011. Affymetrix targets to generate at least 25% of its sales from
new markets in 2011.
Moreover, the company’s distribution agreement with Fischer
Scientific, a unit of Thermo Fisher Scientific
(TMO) and shift of focus to high-growth markets (such as validation
and routine testing markets) represent
positive steps for future revenue growth.
However, Affymetrix is operating in an intensely competitive
industry, which is characterized by rapid technological changes
and evolving market needs. Moreover, it faces risks associated with
lower R&D spending by its customers, notably in Europe, due to
a weak economy and government actions (such as budget cuts). Our
recommendation on the stock is backed by a short-term Zacks #3 Rank
(Hold).
AFFYMETRIX INC (AFFX): Free Stock Analysis Report
ILLUMINA INC (ILMN): Free Stock Analysis Report
THERMO FISHER (TMO): Free Stock Analysis Report
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