Reasons to Retain PacBio Stock in Your Portfolio for Now

Pacific Biosciences of California, Inc. PACB, popularly known as PacBio, has been gaining from its continued focus on research and development. The optimism, led by decent second-quarter 2024 earnings and product development activities, is expected to contribute further. However, long purchasing cycles and business seasonality concerns persist.In the year-to-date period, this Zacks Rank #3 (Hold) company’s shares have lost 76.9% against 6.4% growth of the industry. The S&P 500 Composite has also gained 27.2% in the said time frame.The renowned global provider of sequencing systems has a market capitalization of $640.8 million. The company projects 18.9% growth for 2024 and expects to maintain its strong performance going forward. PacBio’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and met the same in one, delivering an average surprise of 11.1%.Image Source: Zacks Investment ResearchFactors Favouring PACB’s GrowthUnique Technology: We remain optimistic regarding PacBio’s products, which are backed by innovative technologies. PACB has developed HiFi long-read sequencing based on SMRT technology, which helps the company stand out in the genomic sequencing market. It allows for long-read sequencing, offering high accuracy and real-time detection of DNA bases. This capability precisely identifies complex genomic structures, such as structural variations, long-range haplotypes, and epigenetic modifications.  The company is also expanding its genomic solutions with its short-read SBB chemistry, which offers sensitive sequencing for short-read applications. Upon launching the SBB platform, PacBio believes it will be the only company offering both native long-read and native short-read technologies into the market.In November 2024, PACB announced the Vega system, its first benchtop long-read sequencing platform. Thus, Revio and Vega platforms from PacBio both utilize long-read sequencing technology where Revio is optimized for large-scale sequencing demands, while Vega is likely to offer a user-friendly, cost-effective option for smaller, specialized projects. PACB began taking orders for the Vega system in the fourth quarter of 2024, with shipments expected to commence in the first quarter of 2025.Product Development Driving Growth: During the third quarter, PACB upgraded its Revio platform with SpaRC chemistry, boosting data output per smart cell by 33%, lowering DNA input requirements fourfold, and enabling sequencing of up to 2,500 HiFi genomes annually at reduced costs. This update enhances methylation analysis accuracy, introduces 6-methyl A capabilities, and expands sample compatibility to include saliva and tumor samples, making genome sequencing more accessible. Additionally, the launch of Kinnex full-length RNA kits in the fourth quarter of 2023 drives increased Revio placements.PACB's collaborations and partnerships are expanding market reach. Partnering with Singapore's National Precision Medicine Program in November is expected to grow international demand for Kinnex kits. PACB welcomed TGen as the first service provider for its SBB short-read sequencing, catering to clinical customers, and joined the 10X Genomics Compatible Partner program to broaden SBB applications. Integrating Onso into 10X workflows supports single-cell and spatial biology applications, addressing fast-growing market needs.Mixed Q3 Results: PacBio exited the third quarter of 2024 with mixed results, wherein earnings beat the Zacks Consensus Estimate, but revenues missed the same.PACB saw an uptick in Product, Service and other, and Consumable revenues. However, revenues declined geographically in the Americas, Asia-Pacific region and EMEA, which seems concerning. A decrease in adjusted gross profit does not bode well for the stock. However, continued strong prospects in the Revio system, with customers placing orders for these, look promising for the stock.During the third quarter, Myriad Genetics acquired its first Revio system. This company plans to use PacBio's PureTarget kit to develop a high-throughput automated targeted sequencing panel.Per management, GenieUs Genomics is also using Revio in a Phase 2 clinical trial with Duke Health and Temple Health to attest and further develop its bioinformatics platform.Factors That May Offset the Gains for PACBLonger Purchasing Cycles: PACB is experiencing longer-than-expected sales cycles for Revio instruments due to funding uncertainties, procurement delays in Asia-Pacific and Europe, and slower sample volume growth among smaller customers. New customers also face extended purchasing timelines. These challenges are likely to impact the company’s top-line growth.Business Seasonality: PACB’s business is highly seasonal, influenced by customer procurement and budgeting cycles, especially those of government-funded clients. For instance, the U.S. government fiscal year-end in the third quarter often drives increased sales as customers utilize unspent funds. This seasonality leads to significant fluctuations in quarterly results.Estimate TrendPacBio has been witnessing a stable estimate revision trend for fiscal 2024. Over the past 30 days, the Zacks Consensus Estimate for its adjusted loss per share has remained unchanged at 90 cents.The Zacks Consensus Estimate for revenues for fiscal 2024 is pegged at $155.7 million, indicating a 22.4% decrease from the year-ago reported numbers.Key PicksSome better-ranked stocks from the medical industry are Masimo MASI, AngioDynamics ANGO and Globus Medical GMED.Masimo, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated growth rate of 10.4% for 2025. You can see the complete list of today’s Zacks #1 Rank stocks here.MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%. Masimo’s shares have risen 37.2% year to date compared with the industry’s 6.7% growth.AngioDynamics, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 38.2% for 2025. ANGO’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 31.71%.AngioDynamics’ shares have lost 8.9% year to date against the industry’s 6.7% growth.Globus Medical, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 12.7%. GMED’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.1%. Its shares have risen 56.5% year to date compared with the industry’s 6.7% growth.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AngioDynamics, Inc. (ANGO): Free Stock Analysis Report Masimo Corporation (MASI): Free Stock Analysis Report Globus Medical, Inc. (GMED): Free Stock Analysis Report Pacific Biosciences of California, Inc. (PACB): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks