Opko Health Inc. (OPK) Kidney Disease Franchise Keeps This Bull’s Conviction Despite 3Q Earnings Misstep

Louise Chen: Even with less-than-impressive sales for the quarter, OPK stock still poses long-term value.

Opko Health Inc. (NASDAQ:OPK) investors are running for the hills with shares taking a stark 14% drop in pre-market trading today, but Cantor analyst Louise Chen stays the bullish course here, still believing the biotech firm has what it takes for the long-term- even after underwhelming third-quarter earnings.

Still recognizing “rays of sunshine” at play for the company, the analyst maintains an Overweight rating on OPK stock with a $20 price target, which represents a close to 262% increase from where the stock is currently trading. (To watch Chen’s track record, click here)

Investors did not take kindly to the company’s EPS of ($0.08) for the third quarter, which fell $0.03 under FactSet consensus and $0.04 short of the analyst’s expectations. As a result, while the analyst has not fled the bulls by any means, he has tweaked his forecasts for the year to include a now lower EPS projection for 2017.

So what happened to Opko that led to such a stumble in meeting earnings expectations? Chen writes, “The decrease in revenue from services, which drove the sales miss, is attributable to lower pricing at BioReference’s GeneDx division.”

However, the analyst nonetheless highlights drivers ahead that keep him rooting for Opko’s success bigger picture: “Despite these weaker than expected sales, our investment thesis remains intact, and we continue to think that the long term sales and earnings potential of the company’s business are underappreciated and that upward earnings revisions in 2018+, to levels not reflected in consensus expectations, should drive the stock higher. We expect upward earnings revisions to be driven by: 1) the uptake of Rayaldee, 2) commercialization of OPK’s branded drug pipeline, and 3) BioReference sales growth and margin expansion.”

By the close of September, Opko had $100.3 million in cash and equivalents, with expectations for the company’s kidney disease franchise Rayaldee to hit profitability at $8 million to $10 million in sales per quarter.

Opko has a lot of disappointed bulls out today as the stock plummets, as according to TipRanks, out of 5 analysts polled in the last 12 months, 5 rate a Buy on Opko Health stock while 1 maintains a Hold. The 12-month average price target stands at $14.20, marking a nearly 157% upside from where the stock is currently trading.

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