RBC ups rating on Abcam, despite revenue warning

RBC Capital Markets has upgraded its rating on Abcam to ‘outperform’, despite the life sciences specialist warning on revenues.

The Aim-listed firm said on Monday that revenues for the year to 30 June 2020 would be between £14m and £16m lower than predicted, after the coronavirus pandemic hit markets and closed labs across Europe. The antibodies specialist did, however, say it had ramped up its supply chain to meet higher demand for products that are being used to research the virus.

RBC said the trading statement was in line with its expectations and that the update on increased customer activity was “reassuring”.

It continued:“Covid-19 has catalysed consensus forecast adjustments we had been awaiting, and we upgrade to ‘outperform’ based on the sustainable acceleration in revenue growth that we believe is achievable.

“Today’s trading update implies that most updated forecasts are in the right ballpark for 2020, in our view. Commentary around recovering demand, coupled with the company’s strong liquidity, should mean that most investors will look to the second half of 2021, or even the 2022 full year, for full recovery, with qualitative operational and strategic progress sufficient until then.

“Therefore, while we believe that most forecasts still fail to adjust for the ramp in underlying costs, this has become irrelevant in light of the much larger Covid-related adjustments that distort near-term numbers.”

The bank maintained its 1,300p one-year price target on Abcam, but added: “We believe that there is 100% implied upside over the three years.”

RBC’s previous rating had been ‘sector perform’.

As at 1345 BST, shares in Abcam were trading 3% higher at 1,196.0p.