Could LumiraDx (LMDX) Stock Fall Even More After the CAHC Merger?
LumiraDx (LMDX) went public on Sept. 29 and its stock fell significantly. What's LMDX's stock forecast after the CAHC merger, and will it fall more?
Sep. 29 2021, Published 1:17 p.m. ET
In April, LumiraDx (LMDX) agreed to go public by merging with SPAC CA Healthcare Acquisition (CAHC). On Sept. 28, the companies completed their business combination. What's LumiraDx's stock forecast after the CAHC merger?
LumiraDx is a diagnostic company that manufactures COVID-19 tests. The company’s clients include CVS Health, The Bill & Melinda Gates Foundation, and the U.K.’s National Health Service. Since its inception, LumiraDx has raised about $700 million from investors including Morningside Ventures, U.S. Boston Capital, and The Bill & Melinda Gates Foundation.
The LumiraDx and CAHC merger details
On Sept. 28, the transaction was approved by CAHC shareholders. The business combination closed immediately after the shareholders approved the merger. The combined entity started trading on Sept. 29 on Nasdaq under the ticker symbol "LMDX."
About 67 percent of the SPAC’s public shares were redeemed. As part of the deal, LumiraDx is expected to receive about $38 million in cash held by CAHC in trust after redemptions. The transaction doesn’t include PIPE investment.
LumiraDx stock’s forecast
Currently, LumiraDx stock is being tracked by just one Wall Street analyst. The analyst has given the stock a buy recommendation and a target price of $14.75.
Will LumiraDx stock fall more after the merger?
On Sept. 29, LumiraDx stock fell as much as 17 percent, which suggests that investors were disappointed with the deal. In August, the two companies reduced the merger deal value by 40 percent citing several considerations, including a drop in COVID-19 testing volumes and the recent market environment for listed diagnostic companies.
The outlook for LumiraDx stock looks promising in the long term. The company is well-positioned to drive transformation in diagnostic testing with a pipeline of more than 30 different tests covering major health conditions like diabetes, cardiovascular diseases, and infectious diseases. LumiraDx estimates that its total addressable market opportunity is worth more than $50 billion.
LumiraDx’s valuation
CAHC has assigned LumiraDx a pro forma implied enterprise value of $3 billion, which gives it a 2024 EV-to-sales multiple of 2.7x. In comparison, Chembio Diagnostics and Abbott Laboratories are trading at NTM EV-to-sales multiples of 2.3x and 5.7x, respectively.
Should you buy LumiraDx stock now?
LumiraDx's point-of-care diagnostic platform is intended to support a wide range of tests and provide results in less than 12 minutes. The company is producing over 1,000 point-of-care platforms per week and has a manufacturing capacity of over 28 million tests each month. LumiraDx has shipped over 15,000 instruments to more than 90 countries.
LumiraDx expects to witness significant growth in demand for its COVID-19 tests. The tests will likely be required even after the virus is under control. Later this year, the company intends to introduce Amira, which is a low-cost mass screening and home testing device for COVID-19.
LumiraDx has forecast its revenue to grow to $300 million–$500 million in 2021 from $139 million in 2020. In 2024, the company expects to generate revenue in the range of $1 million–$1.25 billion. Overall, LumiraDx stock looks like a good buy based on its robust growth outlook.
