What Happened to EDIT Stock Today?
- Shares of CRSIPR gene editing firm Editas (NASDAQ:EDIT) sunk more than 15% on Friday, after Goldman Sachs initiated coverage on EDIT stock with a “Sell” rating and a $20 price target.
- At the time, the EDIT stock price was hovering above $40, so one could say that Goldman is very bearish, calling for a 50% drop in the stock.
Why It Happened
- Goldman Sachs expressed skepticism about Editas’ leading drug candidate, EDIT-101 — a gene-edited medicine for treating inherited retinal disease (genetic blindness).
- Initial clinical trial data from Editas’ Phase 1/2 trial or EDIT-101 is due before the end of the year.
- Goldman Sachs believes that data will be underwhelming.
Does It Matter?
- This downgrade obviously matters. Just look at the EDIT stock price. It’s collapsing. The Street is giving some credibility to this bearish stance.
- The selloff is way overdone. Let’s add some context:
- The Goldman Sachs analyst behind this call — Madhu Kumar — was previously at Baird, and has been wrongly bearish on Editas before.
- Back in November, while still at Baird, Kumar initiated coverage on EDIT stock with a “Sell” rating and $14 price target.
- The stock was trading around $30 at that point in time. Over the next month, shares tripled.
- You know who probably knows more about Editas than Kumar? The company’s CEO. He bought nearly $1.2 million worth of Editas stock back in early March.
- The next day, Editas board member Jessica Hopfield bought $264,000 worth of EDIT stock.
- Plus, the rest of Wall Street remains bullish. Out of nine other analysts covering EDIT stock, the average price target is nearly $50 — about 60% above today’s price tag.
Editas Stock Forecast
- Zooming out, Editas is on the forefront of pioneering a new class of breakthrough gene-edited medicines.
- If EDIT-101 works, the consensus is that it will be able to generate peak sales of at least $1 billion.
- Biotech stocks tend trade around 8X sales. Editas should trade at a premium to that if EDIT-101 passes trials, because it will validate Editas’ underlying gene-editing technology and increase the likelihood of further commercial successes.
- Call it a 10X multiple. A 10X multiple on $1 billion in sales implies a potential $10 billion company.
- The current market cap hovers around $2 billion.
- Of course, this all hinges on the success of EDIT-101 and gene-edited technologies in general, but recent research in this space has been very promising and Editas has attracted some of the most talented folks in biotech to help it change the world.
- Long-term upside in EDIT stock is compelling.
Bottom Line on EDIT Stock
The big picture here is that the convergence of rapid improvements in AI technology are enabling scientists to perform DNA sequencing faster than ever, which is opening the door for more cost-effective and rapid development of highly effective gene-edited treatments. These gene-edited treatments have the potential to transform healthcare over the next decade, and with time, entirely eradicate disease.
This is a cutting-edge, world-changing trend.
It’s the exact type of trend we like to invest in at the Innovation Investor — our exclusive research platform dedicated entirely to emerging, breakthrough technologies and the companies commercializing those technologies to change the world.
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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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