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Oppenheimer analyst Francois Brisebois reiterated an Outperform rating on Simulations Plus, Inc. SLP with a price target of $67.
Brisebois sees SLP as an attractive vehicle for investors seeking exposure to the biotech innovation themes and data growth waves.
The analyst remains optimistic about the company’s impressive 10-year growth trajectory, which remains in the early innings. The analyst believes SLP’s cash position will help accelerate and strengthen its market-leading position.
SLP reported 3Q23 with a top line of $16.2 million, mostly in line with the analyst’s estimated $16.1 million and consensus of $16.3 million.
On the software front, despite the challenging funding environment, the analyst remains encouraged by revenue coming in at $10.6 million (vs. an estimated $10.5 million).
The analyst notes that the ongoing momentum and recent wins (PK/PD modeling for rare childhood disease AdCom resulted in accelerated approval) were positives in the services segment.
Finally, following the recent Immunetrics acquisition, Brisebois expects continued M&A (essential for SLP’s long-term growth).
The analyst remains remarkably upbeat about the software: services mix representing 65%:35% of 3Q23 revenue, as this trend matches closely to FY23 guidance of 60–65% (software) and 35–40% (services).
In the third quarter, management attributed the non-renewals from small biotechs to the macroeconomic pressures (spending constraints), which was largely anticipated.
Ultimately, Brisebois remains optimistic about the growth of biosimulations, given its critical benefits (faster and more efficient approach to bringing drugs to market).
For FY23, the analyst expects revenues of $60.67 million, up 12.6% Y/Y. FY23 EPS is expected to be $0.64, up from $0.60 a year ago.
Price Action: SLP shares are trading higher by 1.66% to $41.97 on the last check Friday.
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