Goldman Sachs Views Lab Stocks as Attractive, Neutral on Diagnostics; LabCorp (LH) Top Pick, Myriad (MYGN) the Bottom

Lab Corp. (NYSE: LH) shares up over 1%, after Goldman Sachs assumed coverage of the company, also adding LH to the GS Conviction List with a Buy rating and price target of $205. Analyst Patrick Donnelly highlights LH with an "Attractive" coverage view, citing continued market consolidation and strong macro data, fueled by "healthy underlying volume growth" and "meaningful tax benefits."

The note is part of a larger deep-dive on the U.S. Life Science Tools & Diagnostics group, with Buy ratings on LH, Quest Diagnostics Inc. (NYSE: DGX) with a $117 price target and Qiagen NV (NYSE: QGEN) with a $38 price target, in addition to a Sell rating on Myriad Genetics Inc. (NASDAQ: MYGN) with a $32 price target. Goldman Sachs lists LH, DGX, QGEN and MYGN as "Best Ideas" among the group.

While shares of DGX and QGEN, have yet to trade more than 1% in either direction, MYGN shares are down over 7% following the negative GS ratings action. Donnelly suggests "excess optimism around GeneSight reimbursement," is fueling extended and "unwarranted" valuations of 35 times 2018 EPS multiples. Furthermore, Donnelly implies the current valuation would need over $80 million in incremental CY18 GeneSight reimbursement to justify current valuations and sees that reimbursement figure as"unlikely."

The GS analyst reviews the remaining names in the U.S. Life Science Tools & Diagnostics note to clients, offering Neutral ratings on Exact Sciences Corp. (NASDAQ: EXAS) with a $51 price target, Foundation Medicine (NASDAQ: FMI) with a $73 price target and T2 Biosystems Inc. (NASDAQ: TTOO) with a $5.20 price target.

The new price target on LH represents $16.2% upside from Friday's close.

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