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Investing.com -- Morgan Stanley upgraded Lonza Group AG to “overweight” from “equal-weight,” saying the contract manufacturer’s valuation offers what analysts described as an “attractive entry point” ahead of expected 2026 guidance that aligns with market expectations.
The brokerage lifted its price target to SFr 650 from SFr 625, implying multiple expansion from Lonza’s current 16.5x 2026 EV/EBITDA toward 19x, the level embedded in the target.
The analysts said the stock is trading near the lower end of its historical 15-20x range despite what they cited as strong business momentum and clearer visibility on next year’s performance.
The brokerage cited expectations for management to reiterate its 2026 outlook in January, including low-teens organic sales growth at constant exchange rates for the CDMO business and a core EBITDA margin of 31-32%, compared with the firm’s forecast of 31.7%.
Analysts also expect confirmation of progress at the Vacaville site, where Lonza has already signed four contracts, with additional announcements anticipated at the January results.
They project flat 2026 revenue of CHF 536 million from Vacaville, matching what they described as the first year in which new customer volumes offset declines tied to the existing Roche contract.
Lonza’s shares closed at SFr 534.80 on Nov. 24, below the new target. The analysts said the company’s performance is supported by steady demand across integrated biologics and advanced synthesis, alongside improving capacity utilization and ongoing contracting activity.
They said the Capsules & Health Ingredients unit is also expected to show slight improvement in 2026, with 3% forecast sales growth at constant exchange rates and a 26% core EBITDA margin.
In explaining the upgrade, the brokerage pointed to what it called supportive macro conditions, citing expectations for U.S. rate cuts in 2026 and the possibility of renewed investor rotation into healthcare.
Even without earnings upgrades, Morgan Stanley said Lonza’s shares could rise through a recovery in valuation multiples once guidance is published and market confidence improves. “With 22% implied upside, we upgrade Lonza from Equal-weight to Overweight,” the analysts said.