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On Monday, Jefferies maintained a Buy rating on Lonza Group AG (LONN:SW) (OTC: LZAGY) and increased its price target to CHF 647 from CHF 637. The adjustment follows Lonza’s acquisition of a Vacaville site in the United States from Roche for $1.2 billion, a deal that is anticipated to be integrated starting in 2025.
“We like the deal strategically to cement LONN’s leading position in biologics”, Jefferies analyst said.
Jefferies predicts that the acquisition will boost Lonza’s revenues by 3-5% by 2028 and forecasts a compound annual growth rate (CAGR) of 12.5% for the 2024-2028 period, which aligns with the company’s raised guidance of 12-15%. However, the firm also anticipates a lower EBITDA margin of 32% by 2028 due to the expected ramp-up phase.
The financial institution views the deal as a strategic move for Lonza, reinforcing its leading position in the biologics sector. The acquisition provides various scenarios for investors to consider, especially given the limited disclosures about the financial impact of the transaction.
Jefferies has modeled these scenarios into their analysis, leading to the updated price target, which reflects their confidence in the strategic benefits of the acquisition of Lonza. The firm retains its positive stance on the stock, as indicated by the retained Buy rating and the raised price target.
InvestingPro Insights
In light of Jefferies’ optimistic outlook on Lonza Group AG (OTC: LZAGY), recent data from InvestingPro offers additional context to the company’s financial health and market performance. Lonza’s aggressive share buyback strategy, as indicated by an InvestingPro Tip, demonstrates management’s confidence in the company’s value, which could be a positive signal for investors. Moreover, the company’s consistent dividend payments over 24 years, another InvestingPro Tip, provide a level of income stability that might appeal to long-term shareholders.
From a data perspective, Lonza’s adjusted market capitalization stands at a robust $43.82 billion. The company has experienced a commendable revenue growth of 7.94% over the last twelve months as of Q4 2023, with an even more impressive quarterly revenue growth of 12.28% in Q4 2023. These figures align with Jefferies’ revenue growth forecast post-acquisition. Additionally, Lonza’s gross profit margin of 29.0% during the same period reflects a solid operational efficiency that could underpin future profitability.
Investors may also note the strong returns Lonza has delivered, with a significant 9.76% price total return over the past week and an even more impressive 43.19% over the past three months. Such performance metrics are crucial for investors looking to gauge the company’s short-term momentum in the market.
For those seeking more in-depth analysis and additional InvestingPro Tips on Lonza Group AG, including insights into the company’s valuation multiples and debt levels, visit InvestingPro. Subscribers can access a comprehensive list of 12 additional tips, which could further inform investment decisions. To enhance your InvestingPro experience, use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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