Shares of Affymetrix Inc. (AFFX) scaled a new 52-week high of $11.89 on Jan 20, eventually closing at $11.65. This represents a strong year-to-date return of about 18.1%. The S&P 500 jumped almost 11% during the same period.
Affymetrix recently reported impressive preliminary revenue figures for fourth quarter and full year 2014, which justifies the bullish run. The company has also successfully implemented its 2013 restructuring plan, which will improve profitability.
We note that this Zacks Rank #2 (Buy) stock has outperformed the Zacks Consensus Estimate by an average of 53% in the last four quarters.
Key Growth Catalysts
Affymetrix is a major provider of microarray technologies primarily used in the field of genetic research. However, declining demand for GeneChip Expression monitoring arrays has compelled the company to focus on growing markets of translational medicine, molecular diagnostics and applied markets such as agricultural biotechnology.
Affymetrix remains focused on the successful commercialization of newer product lines (CytoScan, Axiom and QuantiGene lines, as well as eBioscience products). Despite a tight academic funding environment, we believe that the company’s product portfolio strength and a string of contract wins will propel growth in 2015.
We believe that Affymetrix’s strategy will drive revenue growth in 2015 and beyond. The company has successfully executed the 2013 restructuring program that aims at improving profitability and liquidity. The company has already completed phase I (2011-2012) and phase II (2013-2014) of the program, in which it realigned its product portfolio with the acquisition of eBioscience.
The acquisition is also expected to boost Affymetrix’s foothold in the fast-growing immunology, oncology and translational medicine markets, which represents an annual opportunity of approximately $2.5 billion. In Phase III (2015-2016) of the program, Affymetrix aims to strengthen its balance sheet that will provide flexibility required to pursue strategic acquisitions.
Estimate Revisions
The Zacks Consensus Estimate for 2014 has remained steady at 25 cents per share over the past 7 days, which reflects a stellar 150% year-over-year growth. Similarly, the consensus estimate for fiscal 2015 has remained unchanged at 27 cents over the same period, which highlights 9% year-over-year growth.
Other Stocks to Consider
Better-ranked stocks in the industry are Alexion Pharmaceuticals (ALXN), Amgen (AMGN) and Celgene (CELG). All three stocks sport a Zacks Rank #1 (Strong Buy).
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