Telix Pharmaceuticals Ltd (ASX: TLX) shares were under significant pressure on Tuesday.
Concerns over higher than expected operating costs in FY 2025 weighed heavily on the rapdiopharmaceuticals company's shares.
While this is disappointing for shareholders, the team at Bell Potter believes that it has created a very attractive buying opportunity for the rest of us.
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What is the broker saying?
Bell Potter notes that the operating expenses bombshell was the third piece of bad news in a short time. Commenting on its latest news, it said:
The purpose of the trading update from earlier today was to inform the market regarding the likely opex spend in 1H25. There was no change to guidance for FY25 revenues or R&D spend.
In the period since Feb 2024, TLX has completed 5 acquisitions for a total of ~$665m which included the recent completion on RLS Radiopharmacies in late January 2025. RLS generated US$79m (A$123m) in revenues in 1H25 and was expected to produce a breakeven operating result. The impact of these additional expenses appears to have been underestimated in consensus earnings. TLX now advises that 1H25 opex is expected to be ~36% of revenues, equating to US$140m (~A$217m). The guidance is relatively close to our previous estimate for opex of $210m.
Time to buy Telix shares
The broker believes that this was an overreaction and is urging investors to buy Telix shares while they are down in the dumps.
This morning, Bell Potter has reaffirmed its buy rating with a trimmed price target of $33.00 (from $34.00).
Based on its latest share price of $18.53, this implies potential upside of almost 80% for investors over the next 12 months.
Commenting on the company and recent news flow, Bell Potter summarises:
The period since 1 January has been difficult – despite record sales (all to easily forgotten in the current circumstance). The triple whammy of the complete response letter on Pixclara, the SEC investigation on the prostate cancer therapies and now the increase in opex beyond market expectation are not easily ignored. Despite these events, the catalysts described above are highly compelling as we set out in our note of 10 July.
The data supporting the approval of Zircaix is gold standard and we believe the BLA is likely to receive approval. ccRCC is an attractive market (TAM~US$500m) with margins likely to be more lucrative than the current GP margin for the group. For these key reasons, we retain our BUY recommendation. PT modestly lowered from $34.00 to $33.00.
