Canaccord More Bullish Than Ever on Quidel Corporation (QDEL); Here’s Why

Analyst bumps up price target on QDEL on back of "sweetened" deal to acquire Alere's BNP Assay segment.


Quidel Corporation (NASDAQ:QDEL) shares were soaring 14% yesterday after the rapid diagnostic testing solutions, cellular-based virology assays, and molecular diagnostic systems provider stepped up its deal to take over all of Alere’s global BNP assets. When the deal closes at what looks like the end of October, under the terms of the new amendment, Quidel is set to gain an incremental, whopping $55 million in newly acquired EBITDA- for merely $240 million in proceeds.

Canaccord analyst Mark Massaro is singing the healthcare firm’s praises, giving the company kudos that this “revised amendment materially sweetens the deal for QDEL.”

In reaction to the news that had Wall Street in thunderous applause, the analyst is out today reiterating a Buy rating on QDEL stock while boosting the price target from $42 to $48, which implies a 17% increase from current levels. (To watch Massaro’s track record, click here)

“Under the amended agreement, QDEL will assume direct commercial responsibility for all of Alere’s global BNP business (replacing Abbott as the distributor), a 63% GM and 61% EBITDA margin business, far above QDEL’s company average EBITDA margin of ~20%, which materially improves the pro-forma accretion of the deal,” highlights Massaro.

Overall, the road for Quidel is shining as far as Massaro sees it, contending: “We are more bullish on QDEL shares than we’ve ever been following news that QDEL amended its agreement to acquire all of Alere’s global BNP assets. While the deal is now expected to close by the end of October (up to one month later), upon closing, the amendment will net Quidel an incremental $55M in newly acquired EBITDA for just $240M in proceeds, a meager ~4.4x EBITDA multiple, well below industry multiples of ~12-30x. We believe the deal was consummated to satisfy all parties and regulators involved to complete Abbott’s acquisition of Alere, which we believe remains on track to close by Sept. 30.”

On the heels of the amended deal, the analyst introduces his 2018 pro-forma accretion forecast of $1.80/sh, which is “far above” the $0.85/sh he had originally considered before the amendment was struck. For 2018, the analyst projects new co. revenues of $496 million; adjusted EBITDA of $145 million with a roughly 29.3% EBITDA margin well over QDEL’s roughly 20% when the company closed out 2016; along with adjusted EPS of $2.65, against the analyst’s standalone 2018 QDEL EPS of $0.85.

After the new terms of the deal for the company to take on direct responsibility for all BNP sales across the world, including capturing all the resultant revenue coupled with margin, Massaro is surely not the only one throwing a bullish parade. TipRanks analytics showcase QDEL as a Strong Buy. Based on 5 analysts polled by TipRanks in the last 3 months, all 5 rate a Buy on Quidel stock. The 12-month average price target stands at $44.50, marking a nearly 9% upside from where the stock is currently trading.