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Investing.com - Morgan Stanley upgraded Fleury SA (FLRY3:BZ) from Underweight to Equalweight on Tuesday, raising its price target to R$18.25 from R$12.50.
The upgrade comes as Fleury’s share price has "decoupled from fundamentals" following unconfirmed press reports involving Rede D’Or, with investor focus shifting toward potential M&A outcomes rather than standalone performance metrics.
Morgan Stanley’s previous Underweight thesis was based on limited organic growth prospects, constrained by pricing pressures and volume saturation in the diagnostics segment, despite management’s "best-in-class execution" and successful integration of Pardini.
The firm continues to observe structural challenges in the diagnostics market, including limited growth in the high-tier beneficiary base, payor efforts to reduce overutilization, industry overcapacity, and hospitals increasingly internalizing diagnostics operations.
While acknowledging Fleury’s operational excellence has helped mitigate some market pressures, Morgan Stanley believes the company’s long-term growth outlook "remains challenged" with limited upside from internal levers following the full absorption of Pardini’s synergies.
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