On a day-to-day basis, there are countless analyst calls – some of which are good and others that are bad – and in this piece, I am looking at three in particular to determine if any are good and present value for investors.
A “responsible” call of caution
Since June 12, shares of Myriad Genetics, Inc. (NASDAQ:MYGN) have traded lower by more than 20%. This loss has come after the Supreme Court ruled to limit gene patents, which obviously hurts a genetic testing company such as Myriad Genetics, Inc. (NASDAQ:MYGN).
However, on Wednesday, Oppenheimer took a bullish stand, initiating coverage with a “Perform” rating. As a result, shares moved higher by 2.23% — but investors should take note that Oppenheimer is only predicting upside of 10% from its closing price on Wednesday.
Overall, I think Oppenheimer’s call was responsible; not good or bad. While many have speculated, we don’t know what affect the Supreme Court ruling will have on Myriad Genetics, Inc. (NASDAQ:MYGN) moving forward. With Myriad Genetics, Inc. (NASDAQ:MYGN) unable to obtain patents on genes BRCA1 and BRCA2, it leaves the company vulnerable to a number of risks.
Quest Diagnostics has already said that it plans to offer BRCA1 and BRCA2 gene testing (to predict cancer) to physicians and hospitals later this year. Then, aside from competition, there are pricing concerns, and a belief that Myriad Genetics, Inc. (NASDAQ:MYGN) will have to drastically lower the price of its tests to compete with new competitors.
With that said, expectations are rock bottom, due to these risks, making Myriad Genetics, Inc. (NASDAQ:MYGN) a very risky investment; but also interesting if the company can weather this storm. Overall, a “Perform” rating is what it deserves.
Ignoring the obvious concerns with this “bad” call
Workday Inc (NYSE:WDAY) shares rose 2.64% on Wednesday behind an initiation of coverage by William Blair; an Outperform rating. The firm is particularly bullish about the company’s new cloud recruiting product and believes that Workday Inc (NYSE:WDAY)’s new services are performing better than competitors Taleo and SuccessFactors’ products.
Workday Inc (NYSE:WDAY) might very well have great growth prospects, with object-oriented technology, and a data model that learns about its customers. However, with the stock trading at 35 times sales, it better have something even more transcendent in the works.
To me, I simply don’t understand this bullish rating. At what point does a company such as this have all upside priced into its stock? Personally, I just can’t find the upside in a stock trading at such a lofty valuation with an operating margin of negative 38%. Thus, I think this is a bad call, one that blindly ignores the company’s decelerating growth, its valuation, and its lack of efficiency.
Re-evaluation & logic creates the call of the day
More than anything, I love to see an analyst re-evaluate a stock that he/she downgraded and then change their outlook based on price and macro conditions. When it’s all said and done, this behavior is what analysts should always exhibit; not the “follow-the-leader” calls that we often see on Wall Street.