On Tuesday, Morgan Stanley adjusted its stance on Maravai LifeScience Holdings Inc. (NASDAQ:MRVI) stock, downgrading it from Overweight to Equalweight and lowering the price target to $10.00 from the previous $11.00. The financial institution's decision follows a review of the company's second-quarter results and management's commentary.
The firm's revised forecasts for Maravai LifeSciences' third-quarter 2024 and full-year 2024 revenues remain unchanged at $68 million and $276 million, respectively. However, adjustments were made to the adjusted EBITDA estimates, now set at $17 million for the third quarter and $59 million for the year, a decrease from the earlier projections of $19 million and $66 million.
Morgan Stanley's new price target is grounded in a discounted cash flow analysis using base-case scenario assumptions. This includes a Capital Asset Pricing Model (CAPM)-derived Weighted Average Cost of Capital (WACC) discount rate of 8.4% and a terminal growth rate of 3.0%.
The $10 price target suggests a valuation of approximately 34 times the company's 2025 estimated EV/EBITDA, which represents a slight discount compared to the average of the Disruptive Life Science peer group, which trades at around 41 times.
The rationale for the discounted valuation is attributed to Maravai LifeSciences' lower anticipated top-line growth compared to its peers, with a compound annual growth rate (CAGR) of 4.5% from 2023 to 2026 versus 7.0% for comparable companies.
Additionally, the firm acknowledges Maravai's similar EBITDA margin profile but points to the company's uneven performance in recent years, sometimes due to factors outside management's control.
The company's significant exposure to new drug modalities, such as CRISPR and mRNA, where budgets are especially susceptible in the current challenging economic environment, was also highlighted as a factor in the decision.
In other recent news, Maravai LifeSciences reported a steady Q2 performance in 2024, with revenues of $73 million and an adjusted EBITDA of $17 million. The company's nucleic acid production segment was the key contributor, generating $58 million, and the Biologic Safety Testing segment added $15 million.
Maravai also announced the establishment of a new mRNA research center at Johns Hopkins University and the launch of several new products.
The company provided a positive outlook for the full year of 2024, expecting its adjusted EBITDA margin to be between 20% and 22%. However, the company anticipates an adjusted EPS loss of $0.02 to $0.08 per share for 2024. Maravai's balance sheet remains strong, and the company anticipates revenue growth from new products. These are the recent developments for Maravai LifeSciences.
InvestingPro Insights
Recent analysis from InvestingPro has brought to light several key metrics and insights for Maravai LifeSciences Holdings Inc. (NASDAQ:MRVI) that investors may find valuable in the context of Morgan Stanley's downgrade and revised price target. The company's market capitalization currently stands at approximately $2.19 billion, reflecting its position in the market. Despite analysts not expecting profitability this year, Maravai's liquid assets are noted to exceed its short-term obligations, indicating a degree of financial flexibility.
Moreover, Maravai LifeSciences has been operating with a moderate level of debt, which may be a factor in its valuation considerations. However, it's worth mentioning that the company has not been profitable over the last twelve months, with a negative P/E ratio of -8.6, and has experienced a significant revenue decline of nearly 48.78% over the same period. This is juxtaposed with a large price uptick of 69.26% over the last six months, which could signal investor optimism or volatility.
InvestingPro Tips for Maravai LifeSciences suggest caution due to downward earnings revisions by analysts and a lack of expected profitability in the near term. Yet, the company's ability to cover short-term obligations and a moderate debt level may offer some stability. For a more comprehensive analysis, including additional InvestingPro Tips, investors can explore the insights available on InvestingPro's dedicated Maravai LifeSciences page at https://www.investing.com/pro/MRVI.
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