Editor's Note: Exact Sciences is a long on Investing Ideas, a weekly newsletter featuring top long-term stock ideas from our 40+ research analysts.
Bears go into hibernation...
Shares of Exact Sciences (EXAS) were up as much as 15.7% today. The maker of Cologuard, a colon cancer DNA screening test, reported third quarter results that beat on both top and bottom line. The company also raised its full-year 2017 revenue guidance from $230-$240M to $254-$257M. Importantly, test orders per provider increased by +30% year-over-year.
Here's an update from our Healthcare team:
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"We continue to forecast an increasing test per provider ratio into 2018 and believe the additional sales force adds in 3Q17 along with repeat testing at Cologuard's recommended 3-year interval will aid in driving this number higher." |
We've been consistently bullish on Exact Sciences since our best idea long call on the company in January, when the company's shares traded below $20 (see below). Back then, bears had juiced short interest in the shares above 30%.
In particular, Citron Research's sensationalist call in May that Exact Sciences could fall to $20 but in "3 to 5 Years: Likely Single Digit, Potential 0" has thus far proven unfounded. "No offense to Citron Research," Hedgeye CEO Keith McCullough said in September. "But when it comes to Exact Sciences in particular, this was just really low quality research."
The crux of our long call has been that, with short interest elevated, we saw significant upside in the shares into 2017 as consensus sales estimates were too low, and implied a massive deceleration in either provider adds, tests per provider or ASP.
So far, we've been right. At $55 now, the stock is up almost 200% since our original call and bears have been largely squeezed out of their positions (the most recent data shows short interest at 9%)
Below is a short timeline of our call from what we've released on Hedgeye.com...
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Why Exact Sciences Has More Upside, Even Though It’s Up 20% Today - (1/9/17)
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30% Upside: Exact Sciences Institutional Call Today at 1pm ET EXAS - (2/16/17)
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Why Exact Sciences Is Up 16% Today (More Upside Coming?) - (2/21/17)
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Review of EXAS Earnings Call (A Hedgeye Best Idea Long) - (4/27/17)
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Exact Sciences: Our Response to Citron’s Short Call - (5/15/17)
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FLASHBACK: Hedgeye Says Buy Exact Sciences | EXAS - (5/31/17)
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Exact Sciences: Citron Research Still Wrong - (9/21/17)
Bottom Line
Simple. We're sticking with our long call on Exact Sciences here.
