On Wednesday, Stephens reaffirmed its Equal Weight rating and a $12.50 price target for Avid Bioservices shares (NASDAQ:CDMO), a contract development and manufacturing organization. The stock has shown remarkable momentum, delivering a 144% return over the past year and currently trading near its 52-week high of $12.48.
According to InvestingPro analysis, the company's stock appears fairly valued at current levels. The company's second-quarter fiscal year 2025 results were announced after the market closed, showing revenue matching Stephens' projections but slightly missing the consensus.
Avid Bioservices reported a backlog of approximately $220 million at the quarter's end, which was below the estimated $235 million, and bookings of around $35 million compared to the expected $50 million. InvestingPro data reveals challenging fundamentals, with a gross profit margin of just 6.27% and negative EBITDA of -$7.69 million in the last twelve months.
The firm did not disclose adjusted EBITDA in its press release. However, indications are that the gross margin was lower than expected, while selling, general, and administrative expenses (SG&A) exceeded estimates. Stephens suggested that one-time items might have influenced these figures and is looking to review the company's 10-Q filing for further details.
In light of the recent announcement that GHO and Ampersand will acquire Avid Bioservices for $12.50 per share in cash, the company has decided to halt its fiscal year 2025 guidance and will not conduct a conference call.
Stephens has reiterated its rating and price target, noting that its estimates are currently under review due to the impending acquisition. For deeper insights into CDMO's valuation and 8 additional ProTips, subscribers can access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Avid Bioservices has been the subject of significant developments. The company has agreed to be acquired by GHO Capital Partners (WA:CPAP) and Ampersand Capital Partners in a deal valued at approximately $1.1 billion, as reported by RBC Capital.
The all-cash transaction, expected to close in the first quarter of 2025, has led RBC Capital to downgrade Avid Bioservices from Outperform to Sector Perform, albeit with a price target increase to $12.50.
In addition to the acquisition, Avid Bioservices has made substantial changes to its executive compensation framework. This includes the expansion of its 2018 Omnibus Incentive Plan and the amendment of its 2010 Employee Stock Purchase Plan, earning stockholder endorsement. The company has also reported a 6% revenue increase to $40.2 million in the first quarter of fiscal year 2025, despite a net loss of $5.5 million.
Furthermore, Avid Bioservices anticipates growth in adjusted EBITDA and margins, with a potential 40% to 60% increase in incremental revenue. KeyBanc analysts have maintained a positive outlook on the company, reiterating an Overweight rating. These recent developments demonstrate Avid Bioservices' commitment to growth and shareholder alignment.
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