Goldman Sachs Shifts Stance On Novartis, Cites Lack Of Near-Term Catalysts

Goldman Sachs has downgraded Novartis AG NVS, citing “limited value driving innovation catalysts in the near term.”

The analyst writes that continued earnings momentum has led to increases in revenue and profit forecasts for fiscal years 2024 and 2025 since the beginning of the year, thanks to upgraded fiscal year 2024 guidance provided in the first and second quarters of 2024.

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Moreover, from a valuation standpoint, Novartis is trading at 14.2 times its projected 2025 EPS, representing an approximately 8% premium over the European Biopharma sector, excluding Novo Nordisk A/S NVO.

Goldman writes the premium has been higher than the average since 2023, which was about 7%, and it exceeds the premium at the time of our initial coverage, around 5%.

For the rest of the year, after presenting the detailed Scemblix first-line chronic myeloid leukemia data at ASCO, the Goldman analyst writes that few catalysts are ahead, offering limited potential for substantial share price growth in the next 12 months.

With consensus estimates now aligned with Goldman Sachs’ projections and anticipating a slowdown in significant news that could drive value until mid-2025, the analyst foresee minimal potential for substantial gains in the next 12 months. Consequently, the stock was downgraded from Buy to Neutral.

Based on the current pace of repurchases, Novartis is on track to finalize its $15 billion buyback initiative between the end of April and mid-May 2025. Since the program’s launch in July 2023, the company’s stock has appreciated by 25%, suggesting that the effects of the share buyback are likely already incorporated into the stock price.

Consequently, further significant gains tied directly to this program are not expected. While introducing another buyback scheme could potentially boost the stock, such an announcement is unlikely before the second quarter of 2025, following the completion of the existing program.

Price Action: NVS stock is down 2.16% at $116.80 at last check Thursday.

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