With Oxford Nanopore having one of the finest debuts on the London Stock Exchange, Maxim Manturov, Head of Investment Research at Freedom Finance Europe delves deeper into the IPO and examines why it was a success and what investors can expect going forward.
What can we attribute this early success to?
“Oxford Nanopore successful placement is related to its products, as genome sequencing is one of the appealing areas. The tests for Covid-19, which were used to study the characteristics of the SARS-CoV-2 genome, also contribute to the company’s attractiveness.
“The company has provided the UK government with rapid tests for Covid-19 under £144 million contracts. Revenue has more than doubled to £114 million, and the company expects to cut losses and break even over the next five years. In general, many investors from around the world were drawn to the company because of the versatility of the technology and the increased demand for the company’s products during the pandemic.
“It should be noted that, in contrast to competitors’ larger machines, the Oxford Nanopore’s handheld device has the potential to open up a new, larger sequencing market worth billions of pounds per year. It’s also worth noting that the company’s product is the first “smartphone sequencer” on the market in the world of large computers.”
Should investors wait or invest now?
“With its DNA and RNA sequencing devices, Oxford Nanopore aims to make it possible to “analyse any living thing by anyone, anywhere,” which is an important tool in medicine, biology, and forensics. An organisations products can transform an industry, allowing it to take the lead in the market. The funds raised during the IPO can help to accelerate product development and propel the company to new heights.
“In 2020, the Oxford Nanopore’s revenue increased by 118.7%, with an EBIT margin of -64 %. Revenue growth slowed to 22% in the first half of 2021, with a margin of -73.9%. The company’s current valuation will be high for non-long-term investors (P/S around 39 versus 15 for rival Illumina, with a 9% decline in revenue growth and a positive margin of 17%). Oxford Nanopore’s future growth dynamics will be heavily influenced by its performance in the third quarter and the start of growth in business margins.
“In general, investors with a one-year or longer time span should consider investing in this company, taking into account the technology and the potential for future sales growth.”