Shares of CareDx, a medical test developer, soared to a 5-year high. Why?

Shares of CareDx, a mid-cap developer of diagnostic tests, soared 13% on September 24—reaching their highest level since late 2021. This came after investment bank BTIG raised its price target for the company’s shares by 23% in one go. The market still views CareDx as a niche player, but with the acquisition of Naveris, a manufacturer of oncology tests, it has gained a new growth driver.

CareDx shares rose 13% on the Nasdaq on September 24, reaching $61.4. This is the highest level since November 2021.

The rally began after investment bank BTIG raised its price target for the company's stock by 23% to $74, while maintaining its "buy" rating. The new price target implies upside potential of 20.5% relative to the stock's last closing price.

BTIG analysts raised their price target following CareDx's investor conference, according to Investing.com.

During the meeting, company executives expressed confidence in significant growth in its core business—transplantation testing. One of CareDx’s products, AlloSure, is designed to detect traces of DNA from rejected donor hearts, kidneys, and lungs in a patient’s blood. Another solution, AlloMap, assesses the activity of the immune system to determine whether it is attempting to attack the transplanted heart.

The new version of the U.S. health insurance regulations, which took effect in August, confirmed that the government-sponsored Medicare program will cover all of the company's tests used to monitor the transplant process.

CareDx management’s enthusiasm was also driven by the development of new business areas, including oncology. The company has its own AI development in this area, designed to predict the risk of recurrence following cancer cell therapy. In addition, in July, it acquired Naveris, the developer of the only Medicare-covered blood test for detecting traces of cancer after treatment.

However, the market views CareDx as a niche player in the field of transplantology, without considering it a company that also operates in the oncology segment, according to the TIKR portal. According to BTIG, the mid-cap stock is trading at a price 5.1 times Wall Street’s revenue forecasts for 2026. At the same time, the average multiple for specialized laboratory stocks is 12.9, while for companies engaged in oncology diagnostics, it ranges from 15 to 19. CareDx has enormous growth potential if the market begins to focus on both of its business segments, according to the TIKR report.

Since the beginning of the year, CareDx's stock price has soared by nearly 226%.

Five Wall Street analysts recommend buying the company's stock, while three others recommend holding it. The average price target of $56.14 is nearly 9% below the stock's most recent closing price.