Bank Of America Upgrades Guardant Health On Huge Growth Potential

Guardant Health Inc GH is off to a red-hot start to 2019, but one analyst says the rally may be just getting started.

The Analyst

Bank of America analyst Derik de Bruin upgraded Guardant from Neutral to Buy and raised his price target from $81 to $84.

The Thesis

While se Bruin says Guardant shares are admittedly expensive after its recent rally, the company’s massive growth potential has skewed the risk decidedly to the upside.

In the six months since Guardant’s IPO, shares have climbed from $19 to above $106 and then back to under $70. De Bruin has been hesitant to get behind such a volatile stock with a steep valuation, but several factors have improved the stock’s outlook in recent weeks.

First, Guardant’s LUNAR-1 data at the American Association of Cancer Research meeting was positive. Second, volatility associated with the IPO lock-up expiration has now passed. Third, there is now greater commercial coverage of G360 following publication of a lung cancer study in “JAMA Oncology.” Finally, de Bruin is now bullish on the liquid biopsy-based (LB) cancer market.

Bank of America projects a $20 billion addressable market for Guardant and is calling for compound annual revenue growth of 41 percent over the next five years. Guardant also entered the Japan market in 2018, which has roughly 3 million patients eligible for LUNAR-1, de Bruin said.

“We see upside potential from higher test volumes, higher commercial pricing, and if the LUNAR programs are successful,” de Bruin wrote in the note.

Price Action

Guardant shares were up 10.6 percent at $73.25 on Wednesday.

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