Analyst Note| Dylan Finley, CFA |
While shares of 23andMe have fallen since going public earlier last year via a special-purpose acquisition company, the company has made a splash over the past decade, driving a brand-new market for direct-to-consumer genetic testing. Out of the 12 million customers who have had their genetic data analyzed by the company, over 80% of have opted in to sharing their de-identified genetic data and research survey responses with 23andMe. Nevertheless, we do not believe the company possesses an economic moat, due to the wide availability of competitor kit companies and lack of pricing power in the market. While our fair value estimate of $8.30 per share suggests a substantial premium versus where the stock currently trades ($3.39 at market close), our valuation is particularly sensitive to the assumptions we’ve made in the company’s therapeutics business. As such, we caution investors, with an extreme uncertainty rating on the company.