Catalysts? You already got one. Now it’s all earnings.
The catalyst component of the story isn’t a major event – the event that has already happened is what set the stock up for the run I think it can have over the next 12-18 months. Today, BLI sits at ~21x NTM EV/Sales with a multi-year growth profile of 30-40%+ in front of it.
Don’t shoot me for calling a 20x EV/Sales company cheap – this is a fantastic relative valuation where companies with similar growth have multiples about 50% higher for the same growth (PACB, TXG, TWST, GH to name a few). Even the most mature businesses in the space, TMO and DHR, have command 4-5x EV/Sales for 8% STM growth for the last 5+ years.
BLI has been clever about following the beat-and-raise playbook since IPO, and took a break from doing so on the ‘raise’ front last quarter despite beating estimates due to uncertainty around when the last 10-15% of utilization in the R&D markets will come back from COVID. I think this will resume over the
next couple of quarters, which should draw a lot of positive attention to a story with no real hair on it. Over the 4 quarters it has been public for, BLI has beaten street estimates by an average of 12%. Since IPO initiations, street 2023 sales estimates have also climbed 20%.
If this plays out, BLI can easily re-rate to 30x fwd sales on higher numbers, creating upside of 25-50% on multiple and another ~20% on forward estimates. Over the longer term, I believe BLI has a disruptive technology that can speed up the drug discovery process and change the way scientists do process development, both of which are desperately needed. If this proves to be the case, $15B is not an unreasonable market cap to expect vs the <$3 Billion it’s at today.
Risks include adoption hurdles such as customer education and competitive entrants. I am comfortable with these risk given the IP protection on the system and the shift to a subcription model that removes the effective price tag and incentivizes utilization/learning simulataneously.
It multiples are a concern, pair w/ short positions in high-growth genomics companies such as TXG, PACB, and TWST, which trade at 33x, 31x, and 26x for similar growth profiles.