On Thursday, Wolfe Research began coverage on shares of Maravai LifeSciences Holdings Inc. (NASDAQ:MRVI) with a Peerperform rating. The firm highlighted several positive aspects of the company, including its best-in-class products, its role in enhancing customer efficiency, a high mix of consumable revenue, and attractive profit margins with the potential for significant improvements.
The analyst pointed out that the company's main challenge lies in the fact that the majority of its revenue is derived from mRNA biologics and vaccines. This sector is perceived as less promising compared to other areas of bioprocessing, and it's anticipated that pressures within this category will persist.
Maravai LifeSciences is currently valued at approximately $1.4 billion. For an Outperform rating, Wolfe Research suggests that a clear path to a valuation of around $1.7 billion would be necessary. The firm noted that peers in the industry typically trade at multiples ranging from 6 to 7 times (with a high of 12 times) of the current year's revenue.
Wolfe Research also compared Maravai's business segments, stating that BioServices Technology (BST) is considered the stronger business. With a valuation multiple of 6 to 12 times the projected 2025 revenue, BST could be worth between $400 million and $800 million.
This assessment implies that for the Nucleic Acid Production (NAP) segment to be valued appropriately, it would require a valuation of $0.9 billion to $1.3 billion, which would be in line with industry peers.
In conclusion, while the valuation may be fair, the firm does not find it compelling in light of their current stance on the mRNA sector. However, they also believe that the downside risk for Maravai LifeSciences appears to be limited.
In other recent news, Maravai LifeSciences reported mixed Q3 results with revenues of $65 million, slightly under expectations due to program timing shifts and reduced demand. The company marked significant developments, including the initiation of customer builds at the new Flanders 2 facility and a collaboration to launch CleanScribe RNA Polymerase.
Despite a noncash goodwill impairment charge of $154 million related to the TriLink business unit, Maravai LifeSciences remains positive about long-term growth, fueled by increased activity in non-COVID mRNA clinical trials and a robust pipeline of innovations.
The acquisition of Officinae Bio, expected to close in early 2025, is set to expand Maravai's precision DNA and RNA services. However, Maravai lowered its 2024 revenue guidance to between $255 million and $265 million due to softer market conditions and delayed customer programs. The company also revised its adjusted EBITDA margin forecast for 2024 to 16%-18%. These are all recent developments, which investors should note.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Maravai LifeSciences' financial situation, aligning with Wolfe Research's analysis. The company's market capitalization stands at $1.42 billion, closely matching the valuation mentioned in the article.
InvestingPro data reveals that Maravai's revenue for the last twelve months as of Q3 2023 was $276.92 million, with a concerning revenue growth decline of -33.99% over the same period. This decline supports Wolfe Research's observation about pressures in the mRNA biologics and vaccines sector.
Two relevant InvestingPro Tips highlight potential challenges for investors: "Analysts do not anticipate the company will be profitable this year," and "Not profitable over the last twelve months." These tips align with the article's cautious stance on the company's current position.
It's worth noting that despite these challenges, InvestingPro indicates that Maravai "Operates with a moderate level of debt" and "Liquid assets exceed short term obligations," suggesting some financial stability amidst the difficulties.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Maravai LifeSciences, providing a deeper understanding of the company's financial health and market position.
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