Deutsche Bank lifts Novartis stock target to CHF115 on Pluvicto optimism

On Thursday, Deutsche Bank (ETR:DBKGn)’s analyst Emmanuel Papadakis increased the price target for Novartis shares (SIX:NOVN:SW) (NYSE: NVS) to CHF115.00, up from the previous CHF110.00, while maintaining a Buy rating for the pharmaceutical giant. The company, with a market capitalization of $214 billion and impressive year-to-date returns of 16.5%, currently appears undervalued according to InvestingPro Fair Value analysis. This adjustment reflects a more optimistic outlook for Novartis’ revenue growth, particularly due to the recent developments surrounding its cancer treatment, Pluvicto. The company has demonstrated strong financial performance with revenue growth of 10.85% and an impressive gross profit margin of 75.22%. InvestingPro data reveals a "GREAT" overall financial health score, suggesting robust operational efficiency.

The upward revision of the price target comes after a prostate cancer expert call held by Deutsche Bank, which provided insights into the market’s reception of Pluvicto’s label expansion. The label expansion, approved the previous Friday, was met with more positive feedback than anticipated. As a result, Deutsche Bank has raised its estimates for the asset, now projecting figures slightly above consensus.

Papadakis cited the label expansion of Pluvicto on PSMAFore as a key driver for Novartis’ mid-term revenue growth. The analyst’s remarks indicated that the approval had surpassed initial expectations, leading to an upward adjustment in asset estimates. Previously, Deutsche Bank’s estimates were modestly below consensus, but they now stand at a low single-digit percentage ahead.

The positive sentiment extends beyond Pluvicto, as Papadakis also referenced encouraging data from Zolgensma, another Novartis asset. Recent data suggests that Zolgensma could impact its peers in the spinal muscular atrophy (SMA) space, further bolstering confidence in Novartis’ portfolio.

The new price target of CHF115 represents a 5% increase from the previous target and is based on a 15 times forward-year 2025 core price-to-earnings ratio. This valuation reflects Deutsche Bank’s confidence in Novartis’ growth trajectory and the potential of its key assets to contribute to the company’s financial performance. Trading at a P/E ratio of 19.1x, investors should note that Novartis will report its next earnings on April 29, 2025. For deeper insights into Novartis’s valuation and growth potential, access the comprehensive Pro Research Report available exclusively on InvestingPro.

In other recent news, UBS analyst Matthew Weston downgraded Novartis shares from Buy to Neutral and lowered the price target from CHF111.00 to CHF104.00. This decision stems from a reassessment of Novartis’s growth prospects, particularly in light of upcoming patent expirations. Key products such as Entresto, Tasigna, and Promacta are expected to face patent expirations by 2025, which may significantly impact the company’s growth trajectory. Despite Novartis’s strong in-market portfolio, including products like Kisqali and Kesimpta, UBS’s projections are only slightly more optimistic than market consensus. The anticipated slowdown in growth by mid-2025 raises concerns about Novartis’s ability to maintain its stock market performance. UBS’s evaluation also indicated that Novartis scores below the median on valuation and strategic parameters, contributing to the downgrade. These developments highlight the challenges Novartis faces in sustaining its financial momentum in the coming years.

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