Goldman Sachs Downgrades Avantor As Shares Spiral 60% Since 2021: 'We Wrongly Assumed...'

Goldman Sachs on Tuesday downgraded Avantor Inc AVTR from Buy to Neutral and lowered its price target from $23 to $14.

What Happened: Since being added to the Buy list on June 4, 2021, Avantor shares have plunged 60.1% versus the S&P 500 +30.7 % and the XLV 13.5%, analyst Matthew Sykes explained.

“We had wrongly assumed that an aggressive cost savings program on the back of a segment reorganization and a bioprocessing business in recovery mode would be enough to continue to drive increased margin expansion and growth,” Sykes said.

Goldman Sachs’ downgrade reflects broader macro and funding uncertainties.

“While we remain confident in the company's ability to expand margins, we are concerned that its Laboratory Solutions business will continue to be a drag on overall growth as competitive pressures intensify and macro headwinds persist,” analyst Sykes adds.

Last Friday, Avantor reported:

• Adjusted EPS of 23 cents in line with consensus.
• Sales of $1.58 billion, missing the consensus of $1.61 billion.
• Sales fell 6% compared to the first quarter of 2024.
• Foreign currency translation had a negative impact of 1%, resulting in a sales decline of 2% on an organic basis.
• Laboratory Solutions sales were $1.07 billion, a reported decrease of 8%. Sales decreased by 3% organically.
• Bioscience Production sales were $516.4 million, a reported decrease of 1%, flat on an organic basis.

Also Read: Avantor Sees Steady Earnings, Plans Leadership Change And Strategy Shift

Why It Matters: Recent economic and policy changes had a notable impact on Avantor this quarter. Customers are cutting back on spending to save money.

Although there are some encouraging signs of improvement in bioprocessing orders, the analyst is more concerned about Avantor's product mix, which hasn't held up as well as we expected.

Goldman sees valuation as supportive at these levels but less attractive than Buy-rated names in their coverage universe as the market looks for sustainable growth improvement.

On Monday, several analysts downgraded and lowered the price target for Avantor, including:

• Baird maintained the Outperform rating for Avantor and lowered the price target from $21 to $17.
• Morgan Stanley downgraded Avantor from Overweight to Equal-Weight and lowered the price target from $25 to $15.
• Barclays maintained Avantor with an Overweight, lowering the price target from $18 to $15.
• Stifel downgraded Avantor from Buy to Hold and lowered the price target from $26 to $14.
• RBC Capital maintained Avantor with an Outperform, lowering the price target from $24 to $20.

Price Action: Avantor stock is up 0.8% at $12.59 at the last check Tuesday.

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