On Thursday, Goldman Sachs initiated coverage on Solventum (NYSE: SOLV), issuing a Sell rating alongside a 12-month price target of $54.00.
The firm's analysis highlighted three key reasons for the bearish outlook on the company's shares. The first concern raised pertains to Solventum's end-market growth, which is projected to be slower than the overall market.
The company's Weighted Average Market Growth Rate (WAMGR) is estimated to be between approximately 3.5% to 4%, while the market growth rate is expected to be between 4% to 6%.
Secondly, Goldman Sachs anticipates that Solventum's market positioning will likely result in modest top-line growth, forecasting an annual increase in the range of 0% to 2% over the next several years. This estimate accounts for adjustments due to business exits.
Lastly, the report points to a lack of details regarding potential upside drivers for Solventum. This absence of information has led the firm to predict that the company will not achieve a sustainable sales and earnings profile until 2028.
Additionally, Goldman Sachs suggests there may be potential downward revisions to Solventum's earnings per share (EPS) in the future.
The new price target of $54 reflects a cautious stance on Solventum's stock, as Goldman Sachs expects the company to face challenges in achieving robust financial performance in the near to medium term.
The Sell rating suggests that the firm advises investors to consider the potential risks associated with Solventum's current business trajectory.
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