BDX - Omnicell downgraded at Wells Fargo citing risks to YTD rally

2023-07-20 12:30:04 ET

Omnicell ( NASDAQ: OMCL ) traded lower on Thursday after Wells Fargo downgraded the pharmacy service provider to Underweight from Overweight, citing risks to the company’s year-to-date rally.

The analyst Stan Berenshteyn argues that Omnicell ( OMCL ) shares have added ~34% this year compared to a ~19% gain in the S&P 500 and notes that the hurdle for the stock to keep advancing seems high given a premium valuation."

According to Berenshteyn, OMCL, based in Santa Clara, California, is trading at ~21x its EV/EBITDA for the next 12 months, compared to ~17x at the end of 2022 and the five-year average of ~20x.

Even based on 2025 consensus estimates, the company’s EV/EBITDA multiple implies a premium to its larger peers such as Becton, Dickinson ( BDX ) and Baxter International ( BAX ).

"Accordingly, we think further share advances will be difficult without estimates moving higher, which we think is unlikely," Berenshteyn added, citing difficulties in intra-year bookings conversion and an YoY decline in backlog coverage amid staffing constraints and pressure on hospital budgets.

Trimming his price target on OMCL to $56 from $65 per share, the analyst noted risks to Wall Street's estimates for the stock.

Wall Street has remained bullish on Omnicell ( OMCL ) stock, with an average rating of Buy from analysts. However, Seeking Alpha Author ratings and SA’s Quant System, which consistently beats the market, indicate OMCL as a Hold.

More on Omnicell

• Omnicell taps Nchacha Etta from Essilor of America for CFO job
• Omnicell: Asset Factors, Profitability, 2 Major Headwinds

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