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Stock Analyst Update

Celera Still Has a Ways to Go

Company continues to deepen genomic data, but business model is uncertain.


What Happened?
Celera Genomics Group (CRA) announced a loss of $0.43 per share Thursday for its first quarter of fiscal 2001, beating the Zacks consensus estimate of a $0.56 loss. Revenue grew 22% from the previous quarter to $18.3 million.

What It Means for Investors
Although Celera is angling to become the premier supplier of genomic information, we believe there's still a lot of uncertainty about whether the company will be able to become the dominant player in the genomics industry. We think investors should generally avoid the stock for now, especially given its high valuation.

Now that some of the frenzy over the sequencing over the human genome has ebbed, Celera's shares have been slipping downward. The stock has declined about 77% from its high in early 2000, despite periods of upswing over that time. Celera--the only company to have sequenced virtually the entire human genetic code--is still working to provide the most comprehensive genomic database for its subscribers. But exactly how Celera will be able to generate significant and sustained top-line growth from these efforts remains uncertain. On the conference call, management reiterated its belief that Celera could double its revenue in fiscal 2001. As we have said before, though, it appears that the shares are priced for much faster growth than this.

Emily Hall does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.