Piper Sandler: 'Opportunities to Buy Dislocated Stocks after Prints'

Piper Sandler analyst David Westenberg sees opportunity in Life Science Tools & Labs, highlighting dislocated stocks as compelling post-earnings buys.

The analyst commented: "Opportunities to Buy Dislocated Stocks after Prints; We will be candid with these stock picks. We're currently in a punitive market, and we think it's unlikely that NEO, MYGN, or CTKB will have meaningful beats - nor do we think they will raise 2025 revenue guidance. Saying that, we believe all of them have a chance to reset expectations to beatable levels. With the stocks trading near all-time low multiples, we believe post print could represent significant opportunities for small cap value/GARP investors. Saying that, we think more cautious investors might want to wait until after the prints, to buy after the reset of expectations. We highlight what we think we could see post quarter that reinforces our 12-month conviction on these OW stocks.

Neogenomics set-up. At 1.3x 2026E revenues, vs. 4.8x average 2Y fwd. for the last five years, we believe NEO could be significantly undervalued on a historical basis. Saying that, the stock step-up into the print might not be as actionable given an aggressive backhalf guide, long-term guidance at the high end of growth over the last three years, and a new management team that still needs to build investor trust. Last quarter was the first miss in a while and the company was under the old CEO. However, current CEO Tony Zook was left to do the explaining, which had investors unsure what to expect. We firmly believe NEO's operations are more sound than they were three years ago, but it became too aggressive in guidance (near and long term) during the management transition.

What we want to see from NEO. Over the last three years, NEO grew double digits through winning back customers and growing NGS well above market rates. We don't believe those drivers are as easy on a going forward basis, but we believe the fundamentals of NEO are much stronger today than they were three years ago. In our view, the "best case scenario" for NEO is for them to beat the Q2 numbers to prove they have visibility, lower the aggressive H2 guidance, and pull the long term guide. We believe that should put the company back in place to trade on a revenue multiple of where it did 1–2 years ago when it had similar fundamentals, but with lower expectations.

Bear's argument on Myriad. Myriad has had a series of missteps: lost reimbursement for Genesight from United, a favorable NCCN guideline decision for a competitor, and some issues with ERP implementation in unaffected hereditary cancer. These issues, and others, have caused the stock to drop >84% from its 52-week-high. While we believe most investors don't expect these revenues to come back, most believe issues with all of these markets will persist. Furthermore, there's still some concern that Myriad could have seen unsustainable benefits from the Invitae implosion.

Myriad what we want to see. We believe the most important point for MYGN is proving they can control cash burn following Q1's $17M burn. Secondly, we believe new CEO Sam Raha needs to present a coherent vision of what MYGN might look like in the next twelve months. In this case, we think MYGN will potentially divest or shut down businesses in order to optimize its spend and move the business further towards a streamlined effort. We need to see the operating costs allocated so that it's invested in tangible near-term growth opportunities. On the quarter, we think the stock will want reproductive health and affected hereditary businesses to perform well. We believe the company can miss in areas expected to be impacted by ongoing issues including, unaffected hereditary cancer, Genesight, and Prolaris, but the company will have to clearly spell out the downside as well as some sort of vision of a strategic plan.

Cytek thesis. We believe Cytek will have achieved a critical point in their operating structure when contribution margins land in the mid to high double-digits. In terms of growth opportunities, we believe expansion into biopharma customers is likely in the nearer term, and that eventually, the company can sell in clinical applications. This is due to the number of parameters they support that help drive the high-dimensional panels where other flow cytometers can't. In addition, we've seen a predictable relationship between the growth in the installed base and the growth of service revenues, which suggest they can make the revenue more recurring over time. We anticipate improving growth in the flow cytometry market to eventually be supported by a user capital equipment refresh. Ultimately, because of CTKB's financial discipline, we believe the company can control its own destiny in terms of when it wants to finance or possibly be acquired. Given that many large companies have a flow cytometry business, we see no shortage of potential buyers.

What we're hoping for? With cautiousness across academic particularly ahead of the NIH budget for next year, we're not optimistic that the US will look strong. Biotech funding is likely to improve, but still remains muted relative to pre-pandemic. We want to see Cytek maintain their financial discipline, have revenues close to consensus, grow consumable revenue, and perhaps give some sort of product road map to make us feel comfortable that it can come out of the tough capital equipment cycle as strong as it went in."

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