Bernstein raises Roche shares target on earnings upgrade potential

EditorEmilio Ghigini
Published 14/06/2024, 11:16
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On Friday, Bernstein SocGen Group updated its outlook on Roche Holding (ROG:SW) (OTC: OTC:RHHBY) shares, raising the price target to CHF 305.00 from CHF 295.00 while maintaining an Outperform rating on the stock. The firm predicts that Roche shares will continue to outperform the market, citing three primary reasons for the positive stance.

Firstly, Bernstein expects significant earnings upgrade potential for Roche, driven by its established franchises and a compound annual growth rate (CAGR) in premium sales that is forecasted from 2024 to 2029.

Secondly, the firm believes the stock is currently mispriced, as their analysis suggests that Roche's current share price only accounts for 20 years of cash flow without considering any terminal value. This valuation is based on a discounted cash flow (DCF) model with an 8% weighted average cost of capital (WACC).

Additionally, Bernstein anticipates at least one major pharmaceutical pipeline catalyst for Roche in each of the years 2024, 2025, and 2026. Despite projections of a 4% dividend yield and a 14% free cash flow (FCF) yield by 2030, the analyst expects the Roche family, which has a significant stake in the company, to maintain M&A discipline.

The firm's analysis and price target change reflect confidence in Roche's financial growth and strategic direction. The new price target represents an increase over the previous target, signaling an expectation for the stock's continued upward trajectory.

In other recent news, Goldman Sachs has downgraded Roche Holding AG (OTC:RHHVF)'s stock, expressing concerns over the company's mid-term Core EBIT projections and anticipated innovation outcomes. The firm initiated coverage with a Sell rating and set a price target of CHF236.00.

Goldman Sachs analysts highlighted that their earnings forecasts are in line with the general consensus for the near term. However, they project a 3%-5% lower Core EBIT for the mid-term compared to consensus estimates. This caution is based on the belief that the expected 200 basis point margin expansion from fiscal year 2026 to 2030 may be overly optimistic.

Furthermore, Goldman Sachs voiced concerns about Roche's innovation outcomes expected in 2024, suggesting that the current market sentiment does not reflect much optimism regarding this aspect. These are recent developments that investors should take into account.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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