Despite Bright Prospects, Credit Suisse Begins Thermo Fisher With Neutral Rating

Although Thermo Fisher Scientific Inc. TMO seems well-positioned to generate robust organic revenue growth and healthy margin expansion going ahead, its stock valuation reflects the bright prospects, according to Credit Suisse.

The Analyst

Credit Suisse’s Erin Wright initiated coverage of Thermo Fisher Scientific with a Neutral rating and a price target of $341.

The Thesis

Thermo Fisher Scientific is “highly levered” to strong industry fundamentals and is poised to benefit from rising biopharma demand, Wright said in the note.

She added that the company has increased its exposure to the faster-growing subsegments like biopharma, through organic investments as well as acquisitions.

Within biopharma, Thermo Fisher Scientific is investing in markets that have above-average growth, like contract development and manufacturing. Wright wrote, “Its perpetual innovation engine, continued focus on geographic expansion in high-growth markets, and further customer penetration will also support growth longer term.”

The analyst expressed optimism in the company’s ability to sustain organic revenue growth of 5%-7% and underlying margin expansion of 40-50 basis points annually. She added, however, that the shares were “priced to near perfection” and that upside from the current valuation levels seemed limited.

Price Action

Shares of Thermo Fisher Scientific  were up 0.94% to $340.42 at time of publication Wednesday.

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