In a research report published Monday, Chardan analyst Gbola Amusa reiterated a Neutral rating on shares of Avalanche Biotechnologies Inc (NASDAQ:AAVL), while reducing the price target from $20 to $17.50. The decreased price target comes after the company announced Thursday that CEO Thomas Chalberg has resigned and will continue as a Scientific Advisor. The new price target implies an upside potential of approximately 25% from the current price of $14.06.
The resignation confirms to the analyst that the recent phase IIa data for AVA-101 in wet AMD were sub-optimal and potentially supports his view that AAVL’s strategy for gene therapy in ophthalmology has flaws and/or that a strategic redirection is necessary.
Amusa wrote, “We now reduce our price target from $20 to $17.50/share, valuing the company on $11.50 cash/share, and $6.00 ex-cash technology value/share, noting that upside could occur on strategic redirection. We continue our preference for AGTC over AAVL, given the considerations in our 22 July 2015 note.”
The analyst continued, “We have had concern on Avalanche’s business model, given what we see as a risky approach for the company in ophthalmology gene therapy.” However, “AVL has $11.50 cash/share (70% of the market cap) and a slow cash burn; with the chance of strategic redirection ahead, we believe ex-cash value of roughly $6/share and a PT of $17.50 is justifiable and potentially conservative, and believe M&A likely limits the potential for downside below $13-$14/share, which is reassuring in choppy biotech markets.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Gbola Amusa MD CFA has a total average return of 19% and a 72.1% success rate. MD has a 4.1% average return when recommending aavl, and is ranked #311 out of 3745 analysts.
Out of the 4 analysts polled by TipRanks, 3 rate Avalanche Biotechnologies stock a Buy, while 1 rates the stock a Hold. With a return potential of 232%, the stock’s consensus target price stands at $47.67.