This my quick and top of the head version of DCF model for BNGO. Please note that I haven't made any pin-point assumptions. All assumptions are ballmark to just get an high level price estimate. I'm not a financial advisor nor a financial analyst. I'm just a random guy applying his financial education in real life.
I'm more than happy to hear your feedback and update my analysis with more accurate numbers or correct any wrong assumptions. Please let me know if I'm missing any other types of revenues/expenses. If you feel its justified, feel free to share it on other social media platforms! 🙂
Recently on SeekingAlpha, an analyst did his DCF model and his price came out to be $7.3 which I feel wasn't justified enough. I believe it was because he didn't factor in Saphyr 2.0 potential and didn't project his sales for longer years. Well, so I took it upon myself as a small little challenge to do a DCF myself.
NOTE: This does not include the Nanonozzle revenue projection because at this point in time, its really hard to estimate those numbers. Also just wanted to note that the top analysts on Tip Rank gave BNGO an average price target of $12. I think this sort of proves my analysis that BNGO is at least worth $12.
EDIT: I have received some critical feedback on my analysis from my post on BNGO subreddit. I will be incorporating those changes, but it will only affect my analysis positively.
Expected sales of Saphyr to increase about 80% every year as more and more labs/clinics/hospitals/etc start to adopt it. Though from year 2028+ I have reduced the adoption to 50% every year, giving me an almost 70% CAGR.
I have broken the sales of Saphyr into “rent” and “sold”. This is because there are different consumables agreement with each type of “sale”. As per CFO in Q1 earnings transcript, he said rentals are more sales; however, this might change as Saphyr is still finding its level. My assumption is 60% rent and slowly reducing down to 35% by 2030+.
Revenue per Consumable:
We currently know it costs $550/consumable. As BNGO’s goal is to reduce it to $100, I have done about $50 decrement each year starting 2024 (when Saphyr 2.0 will launch) and achieving $100 from 2028+.
Saphyr 1.0 is just 5000/14 rounding it down to 350 genomes per year. Why divide by 14? Because that’s what Saphyr 2.0 will be able to do.
Min 120 Genome per 6 month (Rent Agreement):
If someone rents from Saphyr, that’s what the agreement states currently. This means minimum 240genome runs at per Saphyr (rented ones) per consumable price every year. I’m assuming they are running the minimum and not the maximum capacity i.e, about 350/year.
Sold Saphyr 240 Genome Bundle:
Currently BNGO has a bundle going out for clients who buy Saphyr. For them, the genome run would cost $450 instead of $550. However, for ease of calculation, I have not included the $100 discount in my calculation. Everything is being multiplied by consumable price for the year. I’m assuming they are running the minimum and not the maximum capacity i.e, about 350/year.
Saphyr 2.0 Consumables:
This was the trickiest part in my calculations and involves a lot of “assuming stuff.” We all know they are aiming to launch 2.0 by 2024. Therefore, adoption of 2.0 will take time and as a result it will take some time for revenue to start increasing from 2.0. We also know it will be able to do 5000 genomes a year, but not every lab/clinic/hospital/etc will be running that much. So for my calculation I have assumed only 5% of 5000 genomes runs will be done on the Saphyrs installed everywhere. This will increase by 2.5% over the years up to 20% by 2030+. In terms of CAGR, it will be increasing by almost 180% every year. Given the power of Saphyr 2.0, I think its reasonable enough estimate. I also think this is somewhat conservative and the number will be even higher. My calculations are based on that only 25% of the full power of Saphyr 2.0 will be used. This section is debatable and I’m happy to talk more about it and update it with useful feedback.
Revenue growing at 79% CAGR. Again, this is a very conservative number from my perspective. Also, as per Eric (CEO), he expects the revenue to be somewhere between 2.6B – 3.8B with 10,000 Saphyrs sold. In my calculation, we hit 10k mark in year 2029. We can see total revenue is around 2.3B, lower than Eric’s estimation. Though my consumables estimate is between his expectation. Its just the sale of Saphyr that seems to be off. I’m assuming 65% will be sales and 35% will be rent by 2029. Maybe more of sales and less of rent might be a better estimate??
Currently BNGO’s margin is around 33%. To be very conservative, I haven’t increased margin by a lot. I’m estimating margin to steadily grow throughout the years.
This is any other costs over operating expenses, just being more conservative. I’m increasing it at a rate of 20-30% over the years at a 25% CAGR.
You can see BNGO will start to be profitable by year 2024. It will really start to pick up in net profits in year 2026+.
Weighted Average Cost of Capital (WACC):
Formula: Cost of Equity + Cost of Debt
Cost of Equity = Risk Free Rate + Beta*(Market Rate – Risk Free Rate)
Risk Free Rate = 10Yr Treasury Bond = 1.75%
Market Rate = 8%
Beta = 2
Cost of Debt = 0 (As BNGO rarely have any debt)
WACC = 14%
Free Cash Flow:
Assumed Net Profits as a source of free cash flow available to the company.
Assumed a 3% industry average for BNGO. Although this is very unlikely because BNGO is far away from its maturity stage. But for ease of calculation purpose, BNGO will grow at 3% for the rest of its life.
After discounting all the CFs for 10 years at 14%, it gives me the company value to be around 5.5B. This is about 3x the current market cap.
The current outstanding shares are 279M. For the sake of dilution articles out there, lets say BNGO raises extra $350M and lets say at $7 price, this would mean extra 50M shares. So, out outstanding would now be 329M.
Price per Share:
With the 5.5B MV and 279M O/S share, this gives me a share price of $20. This is about 3x the current share price. Giving a potential upside of about 200%. Even with the extra $350M offering, the price would fall to $16.7 per share.
Well, in any case, as per my assumptions in the discounted cashflow method, BNGO seems to be heavily discounted.
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