Exact Sciences Earnings: Below Expectations but No Impact on Long-Term Story, Shares Undervalued

Exact Science’s first-quarter results were below our expectations. Although top-line revenue was in line, adjusted EBITDA was only $39 million, which was only 11% progress on the midpoint of the company’s full-year guidance of $325 million to $350 million. However, we expect later quarters to have both higher growth and better profitability, as the first quarter was affected by both seasonality and a difficult comparison with first-quarter 2023. This earnings report does not change our view of the long-term drivers of the company, either, including the favorable cost-benefit profile of its stool-based Cologuard test relative to blood-based tests, Exact’s strong execution, and its deepening entrenchment in the colorectal screening market. We maintain our fair value estimate of $78 and view shares as undervalued.