Affymetrix Reaffirmed Neutral - Analyst Blog
12 August 2011 - 3:57AM
Zacks
We retain our Neutral rating on genetic products maker
Affymetrix (AFFX). Its second-quarter fiscal 2011
loss per share of 5 cents was a penny higher than the Zacks
Consensus Estimate.
However, losses narrowed 33% year over year as lower costs more
than offset a decline in revenues. Sales dipped roughly 10% year
over year to $64.7 million, hurt by decline in sales to the
California-based company’s academic customers across all markets,
especially in North America. Sales met the Zacks Consensus
Estimate.
Product revenues (down roughly 11%) were hit by lower
consumables and instrument sales. Both DNA and
RNA sales declined in the double-digit bracket in the second
quarter. Despite lower revenues, gross margin improved year
over year on the back of favorable mix and reduced
costs.
Affymetrix is a leading provider of microarray-based products
and services to the global research community. Along with
Illumina Inc. (ILMN), it is one of the two major
providers of microarray technologies primarily used in the field of
genetic research. The company holds a leading position in the gene
expression products and services market.
Affymetrix is enjoying steady end-user demand for its arrays and
is expanding its customer base through new product launches and
strategic alliances. The company broadened its popular Axiom
genotyping platform in the second quarter with the launch of the
Axiom myDesign array for studying mutations in disease and
characterizing genetic interactions.
Moreover, the company unveiled the innovative Cytoscan HD
platform for cytogenetic analysis and is currently working closely
with the U.S. FDA to bring this innovative product into the
market.
Moreover, Affymetrix is pursuing a number of strategies
(including expansion into new markets and strategic alliances)
aimed at expanding its top line. The company’s shift of focus to
high-growth markets (such as validation and routine testing
markets) represents positive steps for future revenue growth.
Affymetrix
targets generating at least 25% of its sales from new
markets in 2011.
However, Affymetrix is faced with intense competition across its
core markets and is exposed to risks associated with lower R&D
spending by its customers. Our recommendation on the stock is
backed by a short-term Zacks #3 Rank (Hold).
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