Needham Downgrades Cepheid (CPHD) in Wake of Danaher Acquisition

Cepheid (NASDAQ:CPHD) just announced it will be acquired by Danaher (DHR) for $53 per share at a sum of $4 billion in cash. In reaction, Needham analyst Michael Matson downgrades the stock from a Buy to a Hold rating without listing a price target. Cepheid shares reacted to the news, jumping nearly 52%, near the acquisition price.

Maston believes $53 per share is a reasonable price, particularly in light of slowed revenue growth and the hurdle of a 2H16 revenue ramp, based on the molecular diagnostics company’s guidance. Moreover, the analyst does not expect regulatory issues to arise that will disrupt the deal, nor does Matson anticipate other bidders to come out of the woodwork.

“The potential for CPHD to be acquired had been a central part of our thesis and one that we had highlighted in our 12/17/15 upgrade note and our last two notes. DHR is a leading player in the diagnostic market but has only a limited presence in the molecular diagnostic segment. We think this is a fair price from CPHD’s perspective since it values CPHD close to its five-year average next-twelve-months (NTM) EV/sales of 6.1x. With limited overlap between DHR’s diagnostic business and CPHD’s business, we do not expect any regulatory issues. We think other bidders are unlikely; we think Abbott (ABT) may have been interested but it is currently embroiled in a legal battle over its Alere (ALR) acquisition,” the analyst concludes.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Michael Matson is ranked #277 out of 4,147 analysts. Matson has a 61% success rate and realizes 7.1% in his yearly returns. When recommending CPHD, Matson earns 1.1% in average profits on the stock.

TipRanks analytics demonstrate CPHD as a Hold. Based on 9 analysts polled in the last 3 months, 1 rates a Buy on CPHD, while 8 maintain a Hold. The consensus price target stands at $35.33, marking a 32% downside from where the shares last closed.

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