Last Update 08 Feb 26

PACB: Long Read Sequencing Collaborations Will Support Future Rare Disease Upside

Analysts have nudged their price targets on Pacific Biosciences of California higher, citing slightly stronger assumptions for revenue growth and profit margins, along with a modestly lower future P/E multiple that keeps their updated fair value estimate around $2.42 per share.

Analyst Commentary

Analysts covering Pacific Biosciences of California are updating their models around the same fair value anchor of about US$2.42 per share. They are emphasizing slightly different risks and opportunities as they refine assumptions on growth, margins, and valuation multiples.

Bullish Takeaways

Bullish analysts see room for execution to better align with their revenue assumptions. This supports keeping the fair value estimate close to US$2.42 even as they adjust other inputs.
Modestly firmer margin expectations suggest to these analysts that the business model could scale more efficiently if management holds the line on costs while growing the top line.
The willingness to use a somewhat lower future P/E multiple, yet maintain a similar fair value, signals that bullish analysts view the earnings power implied by their models as reasonably resilient.
By keeping the fair value estimate anchored rather than marking it lower, bullish analysts are effectively signaling that they see execution risk as manageable relative to the potential cash flow profile they are modeling.

Bearish Takeaways

Bearish analysts point to the need for a reduced future P/E multiple to justify the same US$2.42 fair value. This highlights their caution on how the market might value the company over time.
Maintaining the fair value estimate while trimming the multiple implies concerns that a richer valuation may be difficult to support without clearer progress on profitability.
The focus on only slightly stronger revenue and margin assumptions suggests that bearish analysts are not building in aggressive growth or rapid margin expansion into their models.
Some remain cautious that, if execution or growth falls short of these refined assumptions, there could be pressure on both earnings expectations and the multiple investors are willing to pay.

What's in the News

PacBio plans to work with the n-Lorem Foundation and EspeRare to apply long-read whole genome sequencing in support of individualized antisense oligonucleotide therapies for ultra rare genetic diseases, contributing scientific expertise, sequencing technology, reagents, and support for long-read genome analysis for rare disease research (Client announcement).
The proposed rare disease collaboration is intended to use long-read sequencing earlier in the drug development process to cut down on multiple sequential tests, speed up target validation, and support regulatory grade molecular characterization, with the goal of informing target identification and ASO design feasibility (Client announcement).
PacBio reported that UW Medicine and Seattle Children’s researchers, backed by the SUDC Foundation with in kind support from PacBio, will use PacBio HiFi whole genome sequencing as the first line approach to study Sudden Unexplained Death in Childhood, sequencing each child and their parents to improve detection of complex variants (Product related announcement).
The University of Washington team will join the HiFi Solves Global Consortium, which brings together institutions using HiFi based human genome sequencing in clinical research to expand understanding of genetic diseases and assess the role of long read data in diagnostic workflows (Product related announcement).
PacBio announced CiFi, a community developed method that combines chromatin conformation capture with HiFi long read sequencing to produce chromosome scale, haplotype resolved genome assemblies from a single Revio sequencing run, aimed at projects in genome biology, biodiversity, and functional genomics where sample material or cost are constraints (Product related announcement).

Valuation Changes

Fair Value: Fair value estimate remains effectively unchanged at about US$2.42 per share.
Discount Rate: Discount rate is slightly higher at 10.65%, compared with 9.79% previously, indicating a modestly higher required return in the model.
Revenue Growth: Revenue growth assumption is marginally higher at 13.65%, up from 13.53%.
Net Profit Margin: Net profit margin assumption is slightly higher at 16.40%, compared with 15.69%.
Future P/E: Future P/E multiple assumption is slightly lower at 27.63x, down from 28.30x.

Expanding adoption in global genomics projects and clinical labs is boosting recurring revenue streams, margin stability, and market diversification.
Technical innovation and cost discipline are strengthening competitive leadership, reducing expenses, and supporting long-term earnings growth and sustainability.
Ongoing dependence on academic funding, international risks, losses, competitive pressures, and concentrated revenue sources threaten sustainable growth and increase financial uncertainty.

Catalysts

About Pacific Biosciences of California

Designs, develops, and manufactures sequencing solution to resolve genetically complex problems.What are the underlying business or industry changes driving this perspective?

The growing number of national-scale population genomics and multi-omic initiatives globally-many adopting PacBio's long-read HiFi technology (e.g., 1,000 Genomes Long-Read Project, Southeast Asia and Nordic national programs)-positions PacBio to capture expanding large-volume projects, which should materially increase future revenues and drive recurring consumables demand.
Increasing utilization and adoption of PacBio's platforms across clinical, diagnostic, and hospital labs (with 1/3 of recent Revio placements to clinical settings, and clinical consumables now representing 15% and rising) supports a shift toward more stable, higher recurring consumable/service revenues and improved gross margins as clinical use grows.
Ongoing innovation-including launches of SPRQ chemistry (33% throughput gain, lower sample costs), PureTarget panels, and upcoming multi-use SMRT Cell (enabling reuse, lower cost per genome, and higher gross margin)-provides technical leadership in accuracy, cost, and workflow, expanding addressable markets and supporting margin expansion and earnings growth.
Strong momentum in international markets (APAC +53%, EMEA +35% YoY), driven by hospital, clinical, and research customer wins and broader access enabled by the lower-cost Vega system, helps diversify revenue streams and offsets U.S. funding headwinds, contributing to overall growth and improved revenue predictability.
Cost discipline measures (headcount reductions, restructuring, R&D focus) and scale-driven unit cost improvements (higher SMRT Cell yields, production-rate Vega systems) are driving non-GAAP operating expense and cash burn reductions, with a credible path to positive cash flow by 2027-supporting sustainability of future net margins and earnings.

Pacific Biosciences of California Earnings and Revenue Growth

Pacific Biosciences of California Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Pacific Biosciences of California's revenue will grow by 15.8% annually over the next 3 years.
Analysts are not forecasting that Pacific Biosciences of California will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Pacific Biosciences of California's profit margin will increase from -337.2% to the average US Life Sciences industry of 14.2% in 3 years.
If Pacific Biosciences of California's profit margin were to converge on the industry average, you could expect earnings to reach $34.5 million (and earnings per share of $0.09) by about September 2028, up from $-526.4 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 30.6x on those 2028 earnings, up from -0.7x today. This future PE is greater than the current PE for the US Life Sciences industry at 29.1x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.78%, as per the Simply Wall St company report.

Pacific Biosciences of California Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent dependence on academic and government funding, particularly in the U.S. market, exposes Pacific Biosciences to ongoing revenue pressure and significant uncertainty in instrument sales as NIH and research spending remain constrained, limiting growth and potentially resulting in volatile quarterly results.
Despite international growth, exposure to geopolitical volatility and trade policy uncertainty in key regions like China creates ongoing risks to global supply chains and customer demand, potentially raising costs of goods sold (COGS), compressing gross margins, and threatening future expansion in high-growth APAC markets.
The company continues to report significant non-GAAP net losses and ongoing negative cash flow, requiring them to carefully manage cash reserves and control operating expenses; failure to achieve profitability or positive cash flow by 2027 could necessitate dilutive equity raises, adversely affecting earnings per share and long-term shareholder value.
The rapid pace of innovation and competitive pressure from both established players and new entrants in the sequencing market may drive further price reductions and market share battles, potentially eroding Pacific Biosciences' pricing power, constraining gross and net margins, and challenging their ability to maintain technical differentiation.
Heavy reliance on large population-scale genomic and clinical research initiatives for future revenue growth introduces concentration risk; any slowdown or shift in funding priorities for these projects-caused by macroeconomic, regulatory, or institutional factors-could disrupt the company's trajectory toward higher recurring revenue and more predictable earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $2.111 for Pacific Biosciences of California based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $3.0, and the most bearish reporting a price target of just $1.5.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $242.5 million, earnings will come to $34.5 million, and it would be trading on a PE ratio of 30.6x, assuming you use a discount rate of 10.8%.
Given the current share price of $1.26, the analyst price target of $2.11 is 40.3% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Long-read Sequencing And Genomics Trends Will Expand Market Potential