Piper Sandler upgrades Guardant Health, says shares can rally more than 55%

Published Wed, Sep 27 20239:35 AM EDTUpdated Wed, Sep 27 202311:00 AM EDT

Piper Sandler is bullish on oncology company Guardant Health for the long term. Analyst David Westenberg upgraded Guardant Health to overweight from neutral and maintained his $40 price target, which implies 55% upside for the stock from Tuesday's close. "The company's position in profiling should help it sustain ~20% growth for a number of years," Westenberg said, adding that the recent stock sell-off is a "compelling opportunity" for investors as Guardant Health is the market leader in liquid biopsy. The company owns the first FDA-approved comprehensive liquid biopsy treatment for all advanced solid tumors. Shares of Guardant Health added about 6%. The stock has had a rough year so far, tallying 5.1% in losses to date. "While we have a cautious outlook on Guardant's position in screening, we think the valuation already reflects the market giving them little credit in the area," Westenberg wrote in a Wednesday note. "In fact, we think there's meaningful upside potential for the stock from either a strategic decision (divestment, licensing, commercial partnerships, etc.), or new data could help convince investors of the merits of commercialization." Guardant Health received approval from the U.S. Food and Drug Administration in January for its Guardant360 liquid biopsy test, which helps identify advanced or metastatic breast cancer patients with ESR1 mutations. This could add tens of thousands of tests to the company's annual test run rate, Westenberg said. The Guardant Reveal blood-only liquid biopsy test — which detects circulating tumor DNA for minimal residual disease, or MRD, assessment in early-stage cancers — is another one of the company's technologies. "On top of a base business that grows double digits, the company has extra levers for growth including ESR1, tissuenext, MRD, and international growth," Westenberg said. The analyst views Guardant as a long-term play in MRD. He said that although Guardant will be able to generate meaningful data and have more samples than any competitor to train its artificial intelligence algorithm, he still favors clinical genetic testing company Natera over Guardant for the next five years in MRD treatment .