Fulgent Genetics, Inc.

FLGT Details

Fulgent Genetics, Inc. (NASDAQ: FLGT) operates as a technology-based company that offers genetic testing solutions for oncology, infectious and rare diseases, and reproductive health. FLGT integrates next-generation sequencing (NGS) to its technology platform to provide complete gene sequencing with deletion/duplication analysis in single-gene testing. It also generates revenue by offering COVID-19 and other genetic testing services.

Latest News:

• Neutralizing Antibody Test For COVID-19: On October 27, 2021, FLGT launched an antibody test for COVID-19 focused on neutralizing antibodies specifically through Picture Genetics, its consumer-initiated platform. This lab-developed test can be conducted at a patient's home with a finger prick, eliminating the requirement for a physician visit and venipuncture, thus enabling a better understanding of vaccines' long-term effectiveness and potential herd immunity to COVID-19.

Q2FY21 Results:

• Surge in Topline: The company's revenues expanded 7.90x to USD 153.62 million in Q2FY21 (ended June 30, 2021) from USD 17.27 million in Q2FY20, attributable to 7.61x growth in billable test deliveries to 1.56 million in Q2FY21 vs. 0.18 million in Q2FY20.
• Strong Bottomline Performance: Net income increased 23.03x to USD 79.81 million in Q2FY21 vs. USD 3.32 million reported in Q2FY20.
• Robust Balance Sheet: As of June 30, 2021, the company had cash and cash equivalents (including short-term investments) of USD 383.79 million, with total debt amounting to USD 20.98 million.

Key Risks:

• Customer Concentration Risk: FLGT's top two customers represented 20% and 16% of total revenue in Q2FY21. As a result, the loss of any of these key customers could harm its financials.

Outlook:

• Q3FY21: FLGT forecasts to clock total revenue of USD 125 – 150 million, representing YoY growth of 35% at the mid-point.
• FY21: FLGT expects to generate ~USD 800 million in revenues, thus realizing a YoY growth of 90%. EPS is expected to be USD 12.00 and USD 12.50 on GAAP and non-GAAP basis, respectively.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

FLGT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

FLGT's stock price decreased 2.73% in the past six months and is currently close to the lower-band of the 52-week range of USD 30.05 to USD 189.89. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 51.73. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 95.83.

Considering the slight correction in the stock price, a surge in the top and bottom line, strong balance sheet, the launch of neutralizing antibody test, and current valuation, we recommend a "Hold" rating on the stock at the current price of USD 85.25, up 2.67% as of October 27, 2021, 1:44 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV.