We recently compiled a list of the 10 Best Genomics Stocks To Buy Right Now. In this article, we are going to take a look at where 10x Genomics, Inc. (NASDAQ:TXG) stands against the other genomics stocks.
Genomics is the study of genes and how they function. Many rapidly growing companies are emerging in the genomics field as technological advances substantially reduce the cost, accuracy, and time required to map a human being’s genome.
Investors in innovation, like Cathie Wood, the CEO of ARK Investment Management, believe that these developments are bringing about a “Genomic Revolution.” She stressed the potential of genomics and urged investors to see beyond conventional market benchmarks to seize revolutionary growth. On the eToro’s Digest & Invest podcast on October 21, 2024, Wood emphasized that concentrating only on the most prominent indexes may restrict exposure to ground-breaking innovation. She stated that reduced AI training costs have boosted genomics productivity, opening the door to important breakthroughs like gene editing that targets diseases. She is nevertheless optimistic about these stocks’ long-term worth, despite the present market reluctance and cash flow-driven tendencies made worse by ongoing high interest rates. According to Wood, avoiding this industry may result in missed opportunities as it progresses from development that relies heavily on investments to future profitability. She believes the market is changing and that early adopters will benefit from the convergence of genomics and AI.
Nonetheless, there have been encouraging breakthroughs from a number of genomic companies in 2024, and investors have seen financial rewards as the biotechnology sector of the broader market has risen by 29.33% since the beginning of the year.
According to Grand View Research, the global genomics market was estimated to be worth $32.65 billion in 2023 and is projected to grow at a compound annual growth rate of 16.5% between 2024 and 2030. Factors including the rising need for customized treatment, gene therapy, drug development, rising cancer rates, and a notable surge in consumer genomics demand in recent years are all contributing to the genomics market’s expansion. The pharmaceutical and biotechnology companies segment dominated the global genomic market in 2023, as per the aforementioned research. In terms of market share, North America held the biggest share in 2023 (42.65%), while Asia Pacific is anticipated to develop at the fastest rate during the forecast period.
The fields of gene editing and cell and gene therapies (CGTs) are also developing quickly. The UK approved Casgevy for sickle cell disease and β-thalassemia, pointing out the potential of CRISPR gene editing. According to Deloitte’s research report, the growing market for CGTs, from US$5.3 billion in 2022 to $19.9 billion in 2027, signals a shift towards customized advanced medicine despite high costs leading innovative business models. Furthermore, as per the report, GenAI can analyze a variety of information, such as clinical history, genomes, and social determinants of health, to produce deeper insights that have the potential to completely transform the way healthcare is delivered.
Looking forward, Chris Garabedian, CEO of Xontogeny and Venture portfolio manager at Perceptive Advisors, stated:
“I think 2024 will be a transition year, a little more carnage left and a clearing. There are signs of hope this year, and after the election and that uncertainty is behind us, I think we’re going to start to see 2025 look healthy.”
Methodology:
We sifted through holdings of Genomics ETFs and online rankings to form an initial list of 20 genomics stocks. Then we selected the 10 stocks that had the highest upside potential. The stocks are ranked in ascending order of the upside potential, as of November 14.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A team of medical professionals in surgical scrubs analysing research data in a laboratory.
10x Genomics, Inc. (NASDAQ:TXG)
Upside potential as of November 14: 68.61%
10x Genomics, Inc. (NASDAQ:TXG) is a U.S.-based life science technology company. Its solutions include biological system analysis software, consumables, and devices. The company offers a variety of products, such as informatics software, chromium controllers, reagent kits, and 10x-compatible products. Consumables provide for the majority of its revenue.
10x Genomics, Inc. (NASDAQ:TXG)’s strong portfolio of intellectual property and the widespread recognition of its products show its commitment to innovation. The company has recently placed a high priority on technological development, launching technologies that aim to provide researchers with affordable and adaptable solutions. This includes tools like the GEM-X Flex and revolutionary product lines made to satisfy changing needs in research. For its competitive advantage and market conquest, it is essential to continuously improve its technology products.
Strong consumables demand in Q3 2024 contributed to the company’s noteworthy 70% gross margin growth over the previous year’s 62%. The net loss for the quarter was $35.8 million, down from $93 million YoY. Operating expenses were significantly reduced from $147.9 million in Q3 2024 to $176.6 million in Q3 2023, which led to this improvement.
Leerink Partners analyst Puneet Souda reaffirmed his Buy rating on 10x Genomics, Inc. (NASDAQ:TXG) on October 30, 2024, with a $25.00 price target. The company’s strong single-cell and spatial product portfolios remain industry leaders despite recent interruptions brought on by a major reorganization of the sales force that impacted 40% of US clients and a difficult market climate. Despite the short-term challenges, the reorganization is thought to be necessary for long-term growth. The management of the company seems to be managing the transition well, even if the consequences of these changes are anticipated to last until the middle of 2025.
Additionally, the launch of new products has resulted in reduced prices per sample and cell, which could put short-term pressure on revenues but should eventually be offset by higher volumes as per the analyst. Stable Xenium adoption and robust Visium HD ordering rates demonstrate the continued high demand for spatial products. These factors, along with management’s attempts to increase sales productivity and fill critical positions, imply that the most recent quarter might be a low point before a slow rebound starts in 2025, as per the analyst.
The Brown Capital Management Small Company Fund stated the following regarding 10x Genomics, Inc. (NASDAQ:TXG) in its first quarter 2024 investor letter:
“10x Genomics, Inc. (NASDAQ:TXG) is a leading life-science technology company developing and selling instruments, consumables and software for analyzing gene expression in cells. Gene expression controls the functioning of a cell and is fundamental to developing biological insights and advancing human health. 10x tools comprise three platforms: the original Chromium platform for analyzing loose single cells, which contributes the bulk of company revenue; the Visium platform for spatial analysis of tissue sample; and the recently released Xenium platform for subcellular spatial mapping. They are differentiated by their resolution, efficiency, accuracy, throughput, repeatability and simplicity. The tools are advancing academic research, particularly in the areas of oncology, immunology and neuroscience.
10x Genomics reported mixed fourth quarter results in mid-February, with revenue above expectations, but earnings falling short. However, as noted above, management’s revenue guidance of 8-12% growth for 2024 was a meaningful deceleration from 20% in 2023. Over the past 12-18 months, 10x Genomics has cemented itself as the leader of not only single-cell analysis, with its original Chromium platform, but also in spatial analysis. The company had successful launches of its Visium instrument in late 2022 and its new Xenium platform in early 2023. In addition, 10x Genomics defended its intellectual property in 2023, resulting in Nanostring, 10x’s main spatial competitor, filing for bankruptcy in February 2024. 10x Genomics is in a strong position to push the boundaries of life sciences and capitalize on research spending. We remain confident 10x Genomics has a strong opportunity for growth ahead.”
Overall TXG ranks 1st on our list of the best genomics stocks to buy. While we acknowledge the potential of the TXG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TXG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.