Four banks initiate coverage of Oxford Nanopore with positive ratings

JPMorgan, which started the stock at ‘overweight’ with a 725p price target, said Oxford Nanopore is a differentiated player, operating in an attractive segment, with a very strong long-term topline growth outlook.

"ONT targets the DNA sequencing market, where we see sales growing from circa $4bn in 2021, to more than $8bn by 2025, further strong growth beyond, with growth driven by increased use for research, pathogen surveillance and population sequencing," JPM said.

It said ONT’s approach differs from conventional optical DNA sequencing companies, through the use of nanopores, nano-sized holes able to draw in DNA molecules, and measure current disruption from different DNA bases.

"The approach has several advantages versus its competitors, including increased genomic detail, longer DNA-read lengths, and faster speed/real-time read-outs," JPM said.

It forecasts revenues, ex Covid-19, growing at a 2020-25 compound annual growth rate of 36%.

RBC Capital Markets, which initiated coverage at ‘outperform’ with an 800p price target, said the company’s’ technology has unique attributes which have the potential to enable it to disrupt the sequencing market, which itself is growing at double-digit rates.

"We forecast an adjusted sales CAGR of 38% in 2020-25, to £323m," it said.

Barclays started coverage at ‘overweight’ with a 700p price target, saying Oxford has a "highly differentiated" technology with significant upside potential to estimates mid-term.

Finally, Berenberg initiated coverage at ‘buy’ with a 662p price target.

"Its technology has a wide range of current and future applications spanning clinical diagnostics, scientific and biomedical research, agriculture and environmental monitoring," the bank said.

"Its technology is unique, as it provides rich data, rapid real-time results, instrument portability and a razor/razor blades ie consumables-based business model. Combined, these advantages give ONT a very attractive competitive position within the $5.7bn sequencing market (DeciBio 2021 estimate), which is growing at a mid-teens CAGR."