What Does Fulgent Genetics’ Newly Added Risk Factor Tell Investors?

California-based Fulgent Genetics Inc. (FLGT) is a genetic testing company. It helps with the testing of cancers and infectious and rare diseases. Its tests also cover reproductive health. The company has built a presence in China through a joint venture with local partners.

Let’s take a look at Fulgent Genetics’ latest financial performance, corporate developments, and risk factors.

Fulgent Genetics’ Q2 Financial Results and 2021 Guidance

The company reported a 790% year-over-year increase in revenue to $153.6 million for Q2. Revenue came in below consensus estimates of $197.34 million. Adjusted EPS of $2.55 rose from $0.19 in the same quarter last year but missed consensus estimates of $2.81. Fulgent ended the quarter with $777 million in cash and investments. (See Fulgent Genetics stock charts on TipRanks).

For Q3, the company anticipates revenue in the range of $125 million – $150 million, suggesting 35% year-over-year growth at the midpoint. Consensus estimates call for Q3 revenue of $132 million.

For the full year 2021, Fulgent expects revenue of $800 million, implying 90% year-over-year growth. It anticipates adjusted EPS of $12.50 for the year.

Fulgent Genetics’ Corporate Developments

The company recently acquired Georgia-based CSI Laboratories to expand its cancer testing business. It said CSI Laboratories provides more than 400 unique tests and shares its core value proposition of rapid turnaround times and a broad menu of tests. Fulgent expects the acquisition to grow its presence in the southeastern U.S.

Fulgent has also increased its stake in its Chinese joint venture, FF Gene Biotech which it formed in 2017 with Xi Long Scientific and Fuzhou Jinqiang Investment Partnership. Following an investment of about $19 million, Fulgent now has economic and operational ownership of the joint venture.

In another notable move, Fulgent has entered into a strategic partnership with Helio Health, a company that develops blood-based tests for early cancer detection. Helio is headquartered in California but also operates in China. The deal gives Fulgent exclusive rights to sell Helio tests in the U.S. and Canada.

Fulgent Genetics’ Risk Factors

The new TipRanks Risk Factors tool reveals 62 risk factors for Fulgent Genetics. Since December 2020, the company has updated its risk profile to introduce one new risk factor under the Finance and Corporate category.

Referencing the recent CSI Laboratories acquisition, Fulgent tells investors that it may not achieve the anticipated benefits of the businesses or technologies it acquires. It says that integrating acquired businesses can prove more difficult than expected, resulting in an increase in expenses or loss of revenue. Fulgent cautions that a failure to successfully integrate any acquired business could materially harm its prospects and operational results.

Finance and Corporate is Fulgent’s top risk category, accounting for 34% of the total risks. That is above the sector average of 29%. Fulgent’s shares have gained about 77% since the beginning of 2021.

Analysts’ Take

Oppenheimer analyst Kevin DeGeeter recently reiterated a Buy rating on Fulgent Genetics stock with a price target of $141. DeGeeter’s price target suggests 52.66% upside potential.

The analyst believes Fulgent is on track to beat Q3 revenue expectations. DeGeeter sees Fulgent benefiting from increased COVID-19 tests, citing a significant rise in test volumes in California and robust New York City back-to-school testing policies.

Consensus among analysts is a Moderate Buy based on 2 Buys and 1 Sell. The average Fulgent Genetics price target of $115.33 implies 24.87% upside potential to current levels.