Schrodinger stock rating assumed by Morgan Stanley at Equalweight

Investing.com - Morgan Stanley (NYSE:MS) has assumed coverage on Schrodinger (NASDAQ:SDGR), currently trading at $20.96, with an Equalweight rating and a price target of $28.00, down from the previous $31.00. According to InvestingPro data, the stock is currently fairly valued, with analyst targets ranging from $26 to $39.

The computational drug discovery company reported $180 million in software sales for 2024, achieving 13% year-over-year growth, which met the upper range of its anticipated software revenue growth guidance of 8-13%. Annual contract volume for software customers increased approximately 25% year-over-year, with the number of customers with annual contract values exceeding $5 million doubling. InvestingPro data shows the company maintains strong overall revenue growth at 22.29%, with a healthy gross profit margin of 62.61%.

Schrodinger has demonstrated strong customer retention, with rates of 98% in 2023 and 100% in 2024 for customers spending over $500,000 annually. In the first quarter of 2025, the company reported software revenues of $49 million, exceeding its guidance range of $44-48 million.

For the full year 2025, Schrodinger expects software revenue growth of 10-15%, which would translate to approximately $203 million at the midpoint of guidance. Morgan Stanley projects the company’s software business will reach $404 million in annual contributions by 2035.

This forecast is more conservative than the broader market consensus, which anticipates peak revenue contributions from the software business of approximately $497 million, suggesting other analysts see greater long-term growth potential for Schrodinger’s software division.

In other recent news, Schrödinger Inc. reported its first-quarter 2025 earnings, surpassing expectations with an EPS of -$0.64 against the forecasted -$0.74. The company’s revenue reached $59.6 million, exceeding the anticipated $54.6 million, marking a 63% year-over-year increase. Schrödinger’s software segment contributed significantly to this growth, with a 46% increase, generating $48.8 million in revenue. Additionally, the U.S. Food and Drug Administration granted Fast Track designation to Schrödinger’s MALT1 inhibitor, SGR-1505, for treating Waldenström macroglobulinemia. This designation is intended to expedite the development of drugs addressing serious conditions with unmet medical needs.

In corporate leadership changes, Richie Jain was appointed as the new Chief Financial Officer, succeeding Geoffrey Porges. Jain previously held senior roles in strategic finance and business development at Schrödinger. The company reaffirmed its financial projections for 2025, maintaining its software revenue growth target of 10-15% and drug discovery revenue between $45-50 million. Schrödinger’s strategic focus remains on innovation and cash management, positioning it strongly in the competitive biotech landscape. These developments highlight Schrödinger’s ongoing commitment to advancing its clinical programs and financial stability.

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