The two drastic guidance cuts are a sign of poor control over the business and undermine the credibility of future outlooks.
As of today, the company can focus on sales and the launch of new products in the pipeline (CagriSema in particular), but it's hard to completely turn around a business quickly in the pharma sector.
That said, the numbers remain solid, especially margins, and the dividend appears more than sustainable. My concern, however, is that growth could remain in the single-digit territory over the coming years.
So, looking at the next 5 to 10 years, much depends on how you assess the company’s current pipeline. Over an even longer horizon, there's still time to turn things around and Novo has an incredibly good track record.
(I don't own Novo shares)
Let me know what you think, I'll leave you my valuation model below 👇🏻
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2.
PRICE TARGET: $92 --> $72
POTENTIAL UPSIDE: +38% ✅
"Despite the 67% drawdown, Novo looks cheap but not compelling. Assuming 9% growth and with Lilly’s competition intensifying, the upside is decent but still limited."
ASSUMPTIONS:
LTM Revenue: $44.580B
(𝘢𝘴𝘴𝘶𝘮𝘪𝘯𝘨 𝘜𝘚𝘋/𝘋𝘒𝘒 = 6.80)
5Y Revenue CAGR: 12% --> 9%
2030 Profit Margin: 38%
2030 PE Ratio: 19 --> 17
Shares outstanding: 4.446B
Shares reduction: 1%/year
VALUATION:
Q1 2030 $NVO Share Price =
44.580 * (1.09)^5 * 0.38 * 17 /
[4.446 * (0.99)^5] = 105$
You can now choose the discount rate that you prefer, for Novo Nordisk I want to use 10%.
ACTUAL PRICE: $52
FAIR VALUE: $65
1Y PRICE TARGET: $72
POTENTIAL UPSIDE: +38%
EXPECTED RETURNS: 15.1%/year
DIVIDEND YIELD: 3.2%
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