On Tuesday, CFRA maintained a Buy rating on Lonza Group (LONN:SW) (OTC: LZAGY) with a steadfast price target of CHF610.00. The firm's valuation is based on a multiple of 25 times the expected EBITDA for 2024 or 22.5 times the forecast for 2025, which aligns with the company's three-year average of 22 times.
The year 2024 is anticipated to be a period of transition for Lonza, with projected lower earnings due to the cessation of the Moderna (NASDAQ:MRNA) contract. However, a rebound is expected beyond this year, driven by growth from new assets and Lonza's strong market presence, as well as more favorable year-over-year comparisons.
In the first quarter of 2024, Lonza reported softer performance than anticipated in its Capsules & Health Ingredients division. Despite this, the company experienced positive momentum in its largest division, Biologics.
Clinical demand has been weaker, although there are early indications of a biotech funding resurgence. Lonza remains optimistic about the future, reiterating its 2024 outlook and expecting to see a normalization of performance throughout the first half of the year.
For the latter part of 2024, Lonza projects robust sales, which are anticipated to reflect the timing of batch releases. This outlook offers a degree of reassurance amidst the current challenges. CFRA's analysis indicates that Lonza's position in the market and its upcoming growth initiatives will support the company's recovery after this year's expected downturn.
CFRA's projections for Lonza remain consistent, with no changes to their estimates following the company's qualitative update. The firm's Buy rating suggests confidence in Lonza's ability to navigate through the current year's obstacles and capitalize on its strategic growth drivers in the forthcoming periods.
InvestingPro Insights
As investors consider the CFRA's outlook on Lonza Group, real-time data from InvestingPro can provide a more comprehensive picture of the company's financial health. With a market capitalization of $41.73 billion and a high earnings multiple, reflected in a P/E ratio of 61.55, Lonza appears to be valued by the market for its future growth prospects rather than its current earnings. The company's commitment to shareholder returns is evident, as it has maintained dividend payments for 25 consecutive years, with a current dividend yield of 0.48%. This dedication to consistent dividends pairs with a strong track record of profitability, as Lonza has been profitable over the last twelve months.
InvestingPro Tips highlight that management has been actively involved in share buybacks, signaling confidence in the company's future. Additionally, the stock is known for low price volatility, which might appeal to investors looking for stability in their portfolio. For those seeking further insights and tips, InvestingPro offers additional guidance on Lonza Group, including 9 more InvestingPro Tips available at https://www.investing.com/pro/LZAGY. Investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of strategic investment data.
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