OPKO Health: A $10 Stock On Sale Now For Only $4



  • OPKO Health has been experiencing an historic year in terms of business achievements, execution, and public recognition.
  • The current Opko share price has been trading at extremely depressed levels recently for a variety of reasons.
  • Simple math and extrapolation based on reliable, verifiable data indicates that a reasonable share price valuation for OPK is north of $10, likely in 2021.

Despite what should be one of the most lucrative years for OPKO Health, Inc. (NASDAQ:OPK) given the huge volume of positive events, the share price does not currently reflect what most honest observers would say is a fair valuation of the company. For the purposes of this article, I will focus mainly on current and expected earnings and share price valuation, which has been a huge point of frustration for many OPK shareholders, and the various factors that will drive it. Investors will need to continue to exercise suitable patience, rely on fundamentals, and the execution of the current business plan. The reward will be a potential 300% return on the share price in 2021. I will now illustrate how I arrived at this conclusion.

Since the battle against COVID-19 started in the U.S. back in March, OPKO has been on the front lines of the heroic efforts to contain the virus as it ravages the country. On one front, OPKO's pharmaceutical business has been conducting a trial for their prescription vitamin D treatment Rayaldee as a therapeutic to combat the effects of COVID-19 (for more information on that, I refer readers to this comprehensive Seeking Alpha article). Playing a more featured role in this Covid war is OPKO's diagnostics segment, BioReference Laboratories ("BRL"), which has become the third-largest provider of laboratory testing services in the country. BRL is famously known for the incredible work they've done supporting the NBA in the Orlando bubble that allowed the league to carry out a successful season and led to a contract renewal by the NBA for the 2021 campaign. OPKO is also providing COVID testing services for the NFL (a commercial featuring BRL aired during football games starting last weekend), a variety of businesses, and other organizations across the U.S.

Q4 2020 Earnings Projection

OPKO's investor relations (IR) recently provided detailed guidance that is useful for a "cocktail napkin" evaluation exercises:

We expect revenue for Q4, 2020 to $400 - 430 million, including services revenue between $370 - 400 million, product revenues between $25 - 30 million, and other revenue between $6 - 8 million. We expect costs and expenses to increase to between $380 - 400 million resulting in an operating profit of $20 to $30 million between the revenue and expense assumptions. The increase in costs and expenses are strictly attributable to the cost of sales as we remain committed to controlling all our other operating expense line items. Operating profit includes approximately $22 million of non-cash depreciation and amortization expense as well as an expectation of research and development expense of $18 - 22 million."

Leveraging the high-end revenue and cost estimates (OPKO has had a recent history of beating their guidance in these areas) provided by IR and contrasted with recently reported quarterly data, we can come up with a simple projection for Q4 2020 earnings:


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