AFFX Affymetrix, Inc.

Shares of Santa Clara, Calif.-based biomedical company Affymetrix Inc. (AFFX) spiked 11.5% following the release of its 2013-fourth quarter revenue guidance that exceeded estimates. Shares of the company closed at $8.81, represented a whopping one-year return of nearly 160.0%.

AFFX revealed that it anticipates fourth quarter revenues of $91.0 million, including a one-time licensing payment of $5.3 million from a diagnostic partner. For fiscal 2013, the company expects total revenue of roughly $329.0 million.

Both the quarterly and annual estimates surpassed the Zacks Consensus Estimate of $85 million and $322 million, respectively. The quarterly sales also reflect a 7.8% rise from the year-ago level of $84.4 million.

Affymetrix posted adjusted earnings per share of 5 cents in the third quarter of 2013, surpassing the Zacks Consensus Estimate of 2 cents and rebounding from the year-ago adjusted loss of 3 cents.

Revenues inched up 0.9% to $80.4 million, beating the Zacks Consensus Estimate of $79 million. Product revenues improved 2.9% to $74.8 million, while Service and other revenues dropped 18.8% to $5.6 million in the reported quarter.

Gross margin surged 300 basis points (bps) to 55% from 52% in the third quarter of 2012. However, on an adjusted basis, gross margin increased 100 bps to 61%.

We believe that AFFX is ready for a turn around and the worst days are over for the company. In the face of declining demand for Affymetrix’ flagship GeneChip Expression products, management strategy to transform AFFX into a company with a broad reach in the high-growth markets for translational medicine, molecular diagnostics and applied markets is indeed encouraging.

Currently, AFFX retains a Zacks Rank #1 (Strong Buy). Other players in the biomed/gene industry, which also look attractive at present, include Alimera Sciences, Inc. (ALIM), Genomic Health Inc. (GHDX), and Horizon Pharma, Inc. (HZNP). All of them carry a Zacks Rank #1 (Strong Buy).
 

 
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