Oxford Nanopore Technolo... Share Discussion Threads

[32v31today] 16/1/2024 16:14

Who knows. I suspect today's little lift might be as much to do with interest rate expectations as anything. Same pre (up) then post (down) Xmas with US inflation/ interest expectations. Who knows. I don't think there's any danger of missing out on potential upside any time soon.

[bamboo2] 16/1/2024 12:46

Took a few earlier

[takeiteasy] 16/1/2024 12:18

if the bottom is in, I missed it this time - will have to continue to watch closely now...

[32v31today] 15/1/2024 20:33

And cheap stock often goes up- which is exactly the point. Nothing wrong with waiting and watching though, but for me personally, I'd just be guessing doing that. Agreed, there are holes to pick, but I see most of the value coming from the future. I hope they will just ride it out. They have the cash

[gisjob2] 15/1/2024 13:46

Potential investors may as well sit on the sidelines for a bit and watch how low it goes, timing is everything.

[takeiteasy] 15/1/2024 12:34

The difference between a good investment and a good business as they say....I think a quick response on China issue may start to steady things a little :)

[gisjob2] 15/1/2024 11:52

Sadly missed targets, China issue, increasing headcount and uncertainty has pushed this down regardless of the long term possibilities. Share prices often look cheap but then proceed to get a whole lot cheaper. We know the long term case for this share but what low base will it start recovering from and when. I'm sure the share price looked cheap at 300p at the time.

[32v31today] 15/1/2024 11:36

This stock is like being at Rorke's Drift. Screaming buy at an EV of 1.3bn in my opinion. Fundamentals at a high level... tech is first rate - view unchanged; market opportunity is massive and inevitable- view unchanged; the only uncertainty is the route/ timing to get there (ie broader use in healthcare) and it seems the market is only just realising it's uncertain for some reason. They have enough cash for the ride. The current price is a massive overreaction in my view. The path has always been highly unpredictable.Unless they look like they will run out of cash (not the case) this feels like a buy when crazy cheap and hold your nerve stock. My take is the market is very wrong. I think (hope) I will be regretting not buying more at this price.

[bamboo2] 15/1/2024 11:34

takeiteasy, I reckon, based on Bulkowski's chart pattern averages, approx 150.

74tom, I get the gist of what you are saying, but I still struggle with the idea that staff hiring would be planned around forecasts in company turnover.

The miss on the lifted forecast from March 2022 is down to three basic reasons,

1, the reduction in the planned size of the EGP contract.
2, the loss of business from China, due to chip export limits.
3, delays to US based sequencing initiatives.

There's nothing the co. can do about the first one. It was likely discounted business anyway.

[takeiteasy] 15/1/2024 11:12

So what is the possible bottom share price here near term - anyone have a sense at all?

[74tom] 15/1/2024 09:34

@Bamboo2, because as I pointed out, in March 2022 they were forecasting £190-220m LSRT, so they presumably didn't plan to hire aggressively and miss top line by so much. I doubt they would budget for a decrease in revenue per head, as all it means is that revenue growth rates in future periods have to pick up the slack in order to hit the FY26 EBITDA breakeven promise.

Clearly they are still very well capitalised and likely to end the year with >£450m cash, however is is this huge cash pile which has created the problem?

It's not entirely relevant given it happened nearly 18 years ago, however Illumina reached cashflow breakeven in Q4 2005 on quarterly turnover of $23m and with cash at bank of $50m...

[brucie5] 15/1/2024 09:27

£ corridor moves very quickly each way. But whereas this looked like a temporary visitor to the upper range, it's now looking to test how low. Not quite sure what frightened investors since I see no substantive change to growth in revenues or cash runway, what am I missing..?

[p1nkfish] 15/1/2024 08:37

Let's disagree bb2. Time will tell.

[bamboo2] 15/1/2024 08:10

p1nk, ONT won't be here in 3-5 years timeframe.

My feeling is that later this year when the LAT shares expire, this will be acquired by one of the US based pharma's and go the same way as Solexa. The UK has no capacity for pre profit tech companies on its market, and wants them gone at all costs.

[p1nkfish] 15/1/2024 06:58

Might be good for some to only take part once there is positive upward momentum and sit and watch until then and avoid any stress.

[p1nkfish] 15/1/2024 06:50

This doesn't make a good traders platform stock unless you short. If bought it's probably best on a buy & forget 3-5 year timeframe. All these bumps are relatively short-term and it would be amazing if it was much easier/simpler before breakeven when you look at the scale and disruption they are aiming for along with the complexity.

It illustrates how many things need to line up if the ride is to be smooth but every problem they work around equals more future resilience from experience and accumulated knowledge. What alternative but to plough forward through thick and thin.

[takeiteasy] 15/1/2024 06:12

The company is loss making on EBITDA at present and continues to affirm a specific date for b/even.

If sales growth falls a lot as it has done from H1 to H2 and longer term salary costs increase the risk becomes ever higher that this target may not be reached, especially now given the added China /tech issues.

It is not about it having nice products or a nice runway ahead, more the core assumptions of the EV of the firm are subject to multiple uncertainties - some may take the view now that they see the risks of these targets being met as too high for the current share price and send it lower.

As these issues get resolved and confidence improves then the share price may improve but the share price chart looks awful at the moment with no obvious floor/support level.

Those like me who like the company and may want to invest at some point may then need to simply sit out and wait until things stabilise - dyor and no advice intended etc

[gisjob2] 15/1/2024 02:27

Rising headcount not particularly good in the short term with the turbulence being experienced now.
Might be good for the long term but what level will the share price be languishing at before benefitting from an increased headcount. The graph doesn't lie.
I can't see a reason for new investors to pile in anytime soon despite the share price drop.

[bamboo2] 14/1/2024 18:43

74tom, why chose headcount to judge full year 2023 company turnover?

As the co expands and develops new products, more people are needed. You have to expect that as many of these are R&D posts, they will by definition reduce revenue per head.

Worldwide, Oxford Nanopore is currently advertising 120 open jobs and there seems little chance that headcount will be reduced over the next few years.

[p1nkfish] 14/1/2024 15:10

Huawei or modified NVIDIA?
For me the Chinese ban is a bigger issue than the ME.

There will be many companies with product OK'ed for China in parallel with similar/same for the West. It's a temporary pain in the rear end.

[p1nkfish] 14/1/2024 15:05

I'm certainly one for minimizing headcount and sweating the human capital (a real concern in pre-profit growth companies) as it's hard and costly to have to trim back, but they can't necessarily wait for the results to show before tooling up with people.

ONT are lucky in that they have a clear path forward, even allowing for pot-holes along the way, and the humans will ultimately be utilised and the metrics improve.

I'm expecting ONT to navigate around these (China etc) and other issues and come out a more resilient and flexible company as a consequence. In the meantime it's turbulent.

Just be careful not to be overly exposed if it makes you anxious.

Would be good to know how they get round the China embargo. Others needing GPU's etc for their end products must be in a similar state if shipping to China. There might be an obvious get out of jail card they can pull out of the hat quickly.

[cousinit] 14/1/2024 13:28

Also, they've managed to pick up people from Illumina. You would hope that they are additive to ONT and not for vanity.

[cousinit] 14/1/2024 12:45

Tom, all valid points. I did check GBP vs USD and its not a million miles away from where it was when ONT listed, although it went through the Mini Budget rinser along the way. So currency isn't really a big part of it.

It feels what we might be seeing is long-term thinking not playing out pleasantly in the short term. Did Covid flatter ONT more than it seemed at the time. Seems so. Definitely been challenges with chips, China and large users not rushing to jump off the Illumina ship. Maybe also a bit of the cyclical reining in of spending in private sector anticipating recession and public sector budget pressure post Covid and inflation.

If this was managing for the short term, prices could easily be jacked, especially with the inflationary bout providing cover. Would that affect demand? Probably not much in the short term.

Strategy seems to be offer cost effective, flexible and very capable tech (with continual improvement) and allow it to seep into as broad a range of users and sectors as possible. If you build it, they will come.

This may be the best approach on a 10 year view but is not pretty for a London quoted, loss making (bio) tech.

[74tom] 14/1/2024 09:55

If you crunch the numbers on headcount growth vs LSRT revenue then I think it's easy to understand the market reaction.

In their FY21 annual report, R&D headcount was 291 & SG&A 280, LSRT revenue totalled £127m and therefore revenue per R&D head was £436k, SG&A £454k. In total it was £222k for both headcounts combined.

Last year R&D headcount jumped to 380 and SG&A to 393, LSRT revenue totalled £146.8m and revenue per head declined to £386k per R&D head, £373k per SG&A head, £190k combined.

We haven't got the full year headcount figures for FY23 yet, however even using the half year numbers it doesn't look great; R&D headcount was 445 & SG&A 455, giving a combined per head revenue figure of £187k, this will almost certainly be lower unless they have stopped hiring, which seems unlikely based on @Bamboo2's job vacancy post a few weeks back.

Now clearly, new heads don't contribute revenue straight away, particularly in a business focused on innovation. However, reducing revenue per head + falling revenue growth rates + rocketing headcounts is not great.

Had they maintained the FY21 revenue per headcount figure, LSRT revenue would have come in at ~£200m (445+455*£222k)

Interestingly, this is within the range that they were forecasting in March 2022 when they upgraded guidance...

"The Group expects full year 2022 LSRT revenue to be in the range of £145 million to £160 million and full year 2023 LSRT revenue to be in the range of £190 million to £220 million."

To fall £35m short of the mid point of guidance range set 20 months ago is a problem, to do so whilst rapidly increasing their headcount / overhead base makes it worse.

Of course, this is a very high level and superficial analysis, however these numbers are factual and will absolutely be used as justification for those with shorts in place.

There is so much to be positive about here, however for the investment made since IPO the FY23 numbers are simply not good enough.

[p1nkfish] 13/1/2024 18:10

The problem with China/ME is probably down to the NVIDIA link and ONT allude to developing a work round. If they do get a work around there is a chance some current demand, that currently cannot be shipped to, becomes pent-up. Sales not cancelled forever, just delayed.