What happened
Shares of the contract development and manufacturing organization Avid Bioservices (CDMO) were up by a healthy 34% on heavy volume as of 11 a.m. ET Tuesday. The biotech's stock is marching northward today in response to its fiscal 2023 third-quarter earnings report released yesterday afternoon.
Avid modestly topped Wall Street's consensus top- and bottom-line estimates for the three-month period. However, the real needle-moving event appears to be the steady progress in the company's ongoing expansion efforts.
So what
Before the end of September, Avid expects to have a total of three major expansion projects completed:
- Mammalian cell manufacturing (already open)
- Process development facility expansions (expected to be completed by the end of this month)
- Cell and gene therapy facility expansion (by the end of September)
NASDAQ: CDMO
Key Data Points
What's the big deal? Avid's stock lost over half of its value last year due to concerns about demand for bio-manufacturing in a high inflation/high interest rate environment. That concern was clearly overblown in light of Avid's latest financial results and strong near-term outlook. During the latest quarter, for instance, Avid booked $67 million in new business. This spike seems to have given management the confidence to move forward with these value-creating expansion projects.
Now what
Is Avid stock a buy on this news? After this double-digit move higher, the bio-manufacturing company's stock is now trading at 6.5 times 2024 estimated sales. That's not a super rich premium in the biotechnology space, but it certainly isn't cheap, either. Investors may want to carefully consider the company's long-term value proposition before buying shares at these levels.
