Cepheid in Low $30’s- Long Term Buy

Cepheid is not a cheap stock with a Price to Sales of 6.82, market cap of $2.10B and a forward PE of 122.58 but we see a capitulation of sellers who were playing the MO game with a very expensive stock. Nonetheless Cepheid is a high quality Company and a leader in molecular diagnostics with revenues forecasted at the $332M level with a loss of 12 cents a share for 2012.

M&A provides long term value for the stock as several of our previous Dx and Tools focus stocks were bought out by bigger players (Celera, GenProbe, Immucor).

The stock hit a high of $46 in July and sold off on a Q2 miss. Product sales in Q3 2012  were better than Q3 of 2011 at $78.1M compared to $67.3M. In the quarter, 115 GeneXpert Clinical Systems were installed and  149 High Burden Developing Country Systems(HBDC). Cash at the end of Q3 was $103.5M.

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