Berkeley Lights’ Target Price Raised to $80 at Morgan Stanley After Earnings Beat, Forecasts $120 in Best Case

Morgan Stanley raised their stock price forecast on Berkeley Lights to $80 from $65, assigning an “Equal-weight” rating and said the leading digital cell biology company’s top-line earnings beat in its first quarter was driven by robust system installs to cell therapy and CRO/CDMO customers and a strong recovery in recurring revenue of the expanding installed base.

On Thursday, Berkeley Lights reported total revenue of $18.2 million for the third quarter, representing a 16% increase over the same period in 2019 and a 72% increase compared to the second quarter of 2020. That was higher than the Wall Street estimate of $15.3 million.

“We are updating our model to reflect 3Q20 results and management commentary on 4Q20. We slightly increase our 2021/2022 estimates by 5% to $88M and $122M with more material increases to our estimates in the out years to reflect a faster penetration of the cell therapy TAM vs. our prior forecast. Our DCF analysis is based on our increased base case estimates and uses a WACC of 5.6% and 3.0% terminal growth, to yield our Dec. 2021 price target of $80,” said Tejas Savant, equity analyst at Morgan Stanley.

“While we see a clear path to the longer-term upside to our estimates, we believe that relative outperformance in the near term is likely to be somewhat muted by its current valuation and therefore, we maintain our Equal-Weight rating. Despite the high multiple, we view the Equal-weight rating as justified as Berkeley Lights (BLI) addresses a large and growing TAM of $23B between antibody therapy, cellular therapy and synthetic biology end markets with their proprietary platform representing one of the most highly differentiated cell selection technologies to come to market to date. With little competition on the horizon, we view the company as very well positioned to penetrate its addressable market, as the company’s customers reap the rewards of significantly accelerated development and commercialization timelines and differentiated profiles for their products. That said, after pricing the IPO at $22 back in July, the stock opened at $65 and is now trading at >$90,” Savant added.

Berkeley Lights’ shares closed 4.59% higher at $95.00 on Friday; the stock is up over 85% since it began trading on the Nasdaq Global Select Market on July 17, 2020.

Morgan Stanley gave a target price of $120 under a bull scenario and $60 under the worst-case scenario. Other equity analysts also recently updated their stock outlook. Berkeley Lights had its target price hoisted by analysts at JP Morgan to $100 from $75. The brokerage presently has an “overweight” rating on the stock. In addition, KeyCorp initiated coverage on shares of Berkeley Lights and set an “overweight” rating and a $95.00 target price.

Two analysts forecast the average price in 12 months at $98.50 with a high forecast of $100.00 and a low forecast of $97.00. The average price target represents a 3.68% increase from the last price of $95.00. Both analysts rated “Buy”, according to Tipranks.

“BLI addresses a large and growing TAM of $23 billion between antibody therapy, cellular therapy and synthetic biology end markets with their proprietary platform representing one of the most highly differentiated cell selection technologies to come to market to date,” Morgan Stanley’s Savant added.

“However, while we see a clear path to the longer-term upside to our estimates (most notably driven by our conservative assumptions around subscription, Lighting placements, new workflows, and additional synthetic biology penetration beyond Ginkgo), we believe that relative outperformance in the near term is likely to be slightly muted by its current valuation (on an EV/Sales basis, BLI trades at 69x our 2021 and 51x our 2022 estimate).”

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