Exelixis Earnings Beat Fails to Lift Stock Amid Deep-Seated Valuation and Risk Concerns

What happened

Exelixis reported Q4 2025 earnings with EPS of $0.94, beating consensus by 27% and showing 95% YoY growth, driven by strong Cabometyx performance. However, the stock fell about 2% in early trading, reflecting investor skepticism or profit-taking despite the headline beat. The DeepValue master report notes that Exelixis trades at ~17x EPS with a 'WAIT' rating, as the Cabometyx franchise dominates over 80% of revenue but faces imminent patent cliffs and pricing pressures from U.S. policy reforms. This earnings report, while solid, does not address the core risks of heavy product concentration and the unproven zanzalintinib pipeline, which are critical for future growth. Consequently, the market's muted reaction suggests that near-term earnings strength is already priced into a stock that has risen 28% over the past year, with investors focusing on longer-term structural vulnerabilities.

Implication

The EPS beat confirms Cabometyx's near-term profitability but fails to mitigate key downsides like generic competition risks post-2026 and policy-driven pricing pressures that could erode margins. The stock decline post-earnings indicates that positive news is insufficient to drive further upside without de-risking zanzalintinib's regulatory path or showing sustained above-guidance growth. DeepValue's 'WAIT' rating with an attractive entry at $38 suggests that current levels around $44 offer limited margin of safety, especially in a crowded, well-owned stock where institutions are taking profits. Investors should closely monitor Cabometyx's U.S. RCC/NET market share and zanzalintinib's NDA submission progress, as deviations from guidance or delays could trigger significant downside. In the near term, expect continued volatility and consider trimming positions above $52, as per DeepValue's advice, while awaiting a pullback or clearer evidence of durable growth to justify entry.

Thesis delta

The investment thesis remains unchanged; the earnings beat reinforces Cabometyx's current earnings power but does not reduce the risks from product concentration, patent cliffs, or zanzalintinib's binary regulatory outcomes. Therefore, maintaining a 'WAIT' stance with a focus on entry points near $38 is prudent, as this news does not provide enough upside to offset the structural challenges highlighted in the DeepValue report.