Numis broker note says Novacyt shares could quadruple and achieve mid-cap status

The share price of Novacyt could quadruple in value to £34 according to estimates put forward by its broker Numis.

After initiating coverage, Novacyt issued a broker note on Friday morning that heralded a ‘new diagnostics leader emerges’.

At the time of writing the share price of Novacyt was at £8.35 – however it later climbed by over 10% following the report which initiated a buy recommendation on the share with a target price of £13.65.

However, the valuation of £13.65 is conservative even by Numis’s own admissions. It notes that this is somewhere between its base and bull case forecast between £9.5 and £15.

Its most bullish forecast could see Novacyt hit £34 a share considering its longer-term potential and recurring revenues into the NHS, contributing to a peak of 1bn EURO in revenue in the long-term.

This would essentially quadruple the value of the shares and firmly cement its status as a mid-cap company (with a £2bn+ m.cap) as CEO Graham Mullis previously outlined to Sharebuyers.

Breaking down its rationale into four areas, Numis highlighted the following points:

  • First mover advantage which has allowed it to rapidly scale up its business.
  • A stronger H2 and 2021 with revenues expected forecast anywhere from 380m EUR to over 600m EUR.
  • Strong cash generation and acquisitions means it will be able to consolidate the wider diagnostics industry.
  • Longer-term potential as discussed above.

Our view on Numis’s outlook for Novacyt

This is not just another positive broker note. It mirrors what we have been saying about Novacyt for quite some time and all adds up.

If anything, its current target price appears to be quite conservative and it focuses mainly on NHS revenues. Numis themselves noted that its target price is on the low side considering the long-term potential.

At the moment, the market still hasn’t quite grasped the earnings prowess of Novacyt but soon it won’t be able to ignore the quite frankly sky-high numbers it will be posting.

Novacyt is a phenomenal AIM and business growth success story which has a few more chapters left in it.

Hold for gold!

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