10x Genomics (TXG), mcap=$3bn, price $26.72 vs $38.68

$TXG pitch:
– Life sciences company that pioneered the single-cell category within genomics.
– TXG operates with a razor-and-blade model with 85%+ of its sales being high-margin consumables.
– Trades at its lowest valuation since its IPO in 2019 due to the impact of a transitioning customer base in the US, a supply chain stumble in Europe and the complete shutdown of genomics labs in China.
– However, fears are overblown.
– Growth is set to reaccelerate next year with plenty of headroom for further expansion as TXG single-cell technology continues to gain popularity among academic labs as well as pharma.
– Management expects to reach profitability in 2023.
– TXG has the potential to achieve 30%+ operating margins in line with $ILMN, which has a similar razor-and-blade business model.

$TXG valuation:
– Trades at 7x NTM sales, has 80% GMs under normal conditions and is close to cash flow breakeven.
– With no debt, a 35% operating margin, and a 20% tax rate, 10x Genomics would be trading at 25x its NTM EPS if it was at that level of profitability today.

Exp. gain: Not specified.

Full TXG write-up (free guest account required):

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