Tuesday, July 28, 2009

Quidel (NASDAQ:QDEL): Downgraded at Stephens

One call that I like this morning (in light of pre market weakness) is Stephens' downgrade of Quidel (NASDAQ:QDEL) to Equal Weight from Overweight. Price target remains at $16.

Firm notes the downgrade is based on valuation. The stock has had a very nice run in light of a significant improvement in near-term fundamentals associated with swine flu. They believe the current valuation of 29x 2010 EPS estimate fully represents the current fundamental outlook. Additionally, they worry that a speculative bubble might be building surrounding investors buying this name solely based on near-term upside to estimates associated with swine flu. While they believe QDEL is likely sitting in front of a sustained period of stronger-than-average flu activity, they believe investors would be shroud to focus on long-term sustainable earnings power.

Firm's belief is that their 2010 EPS estimate of $0.54 estimate is a better indication of long-term earnings power. Finally, based on channel checks at AACC, Stephens would highlight that they have some concerns surrounding increased commoditization and pricing pressure in some of QDEL's core markets. They recommend investors move to the sidelines and look for a better entry point with this name.

Notablecalls: Note that Stephens is the main firm covering QDEL. They have done well with the stock and are now telling people to get out. The stock will get hit..it will bounce...and will get hit again. That's what I think will happen today.

This one can do 5-7% to the downside.

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