Morgan Stanley assumes coverage of Charles River Labs stock with Equalweight rating

Investing.com - Morgan Stanley has assumed coverage of Charles River Labs (NYSE:CRL) with an Equalweight rating and a price target of $185.00, according to a research note released Monday. The target represents a potential 5% upside from the current price of $176.09.

The price target represents a valuation of 11.5 times the company’s expected 2026 EBITDA, according to Morgan Stanley’s analysis. For context, Charles River currently trades at an EV/EBITDA multiple of 12.35x based on last twelve months’ EBITDA of $886.19 million.

The investment bank cited several headwinds that Charles River Labs needs to navigate before it would consider a more positive outlook on the stock.

Morgan Stanley acknowledged management’s initial steps to address weaker components of the business and noted that the current valuation is cheap compared to historical levels.

Despite these positive factors, the research firm indicated that below-average near-term growth and margins were key reasons for maintaining a neutral stance on the stock. While the company was not profitable over the last twelve months, InvestingPro analysis suggests net income is expected to grow this year. The stock has shown strong momentum with a 31.34% price return over the past six months, though it remains undervalued according to InvestingPro’s Fair Value assessment. Discover more insights and 5 additional ProTips for CRL in the comprehensive Pro Research Report available on InvestingPro.

In other recent news, Charles River Laboratories reported its third-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $2.43, compared to the projected $2.34. The company’s revenue also exceeded forecasts, reaching $1 billion. Despite these positive earnings and revenue results, investor concerns remain due to factors such as organic revenue decline and operating margin contraction. Additionally, the U.S. Securities and Exchange Commission concluded its investigation into Charles River Laboratories regarding the sourcing of non-human primates, deciding not to recommend any enforcement action against the company.

In terms of analyst activity, Baird upgraded Charles River Labs from Neutral to Outperform, raising its price target to $199.00 from $178.00, citing long-term growth potential despite acknowledging some near-term challenges. Conversely, TD Cowen lowered its price target for Charles River Laboratories to $197.00 from $205.00, while maintaining a Buy rating, following a strategic review update that suggested a full Manufacturing sale is unlikely. These developments reflect the mixed sentiment among analysts about the company’s future prospects.

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