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UBS cuts Acadia Pharma stock target, maintains buy rating

EditorAhmed Abdulazez Abdulkadir
Published 04/30/2024, 07:32 PM

On Tuesday, UBS has adjusted its outlook on Acadia Pharmaceuticals shares, lowering the price target to $27 from the previous $33, while retaining a Buy rating on the stock. The decision comes after a revision of the expected peak sales for the company's drug, Daybue.

The firm's analyst cited a revised one-year discontinuation rate expectation as the reason for the reduction in Daybue's peak sales forecast, now set at $421 million, down from the initial $940 million estimate. This figure also falls below the consensus estimate of $864 million. Despite this, the analyst holds onto the Buy rating, suggesting confidence in the stock's potential.

The valuation of Acadia Pharmaceuticals by UBS is underpinned by a discounted cash flow (DCF) method, which supports the 4.0x enterprise value to the estimated 2029 sales multiple. According to the analyst, even with the lower forecasts for Daybue, the drug is still valued at $5 in the revised DCF assessment. The remaining valuation is attributed to Nuplazid, valued at $8, and the company's pipeline assets, valued at $14.

The analyst's comments indicate that despite the conservative estimates for Daybue, the current market valuation of Acadia Pharmaceuticals presents an attractive buying opportunity for investors. The comprehensive valuation considers the potential of the company's entire portfolio, including its pipeline assets, rather than focusing solely on the near-term prospects of Daybue.

InvestingPro Insights

UBS's recent price target adjustment for Acadia Pharmaceuticals may lead investors to seek further clarity on the company's financial standing and future prospects. According to InvestingPro data, Acadia's market capitalization stands at $2.82 billion, with a negative price-to-earnings (P/E) ratio over the last twelve months as of Q4 2023, reflecting the company's current lack of profitability. However, with a robust revenue growth of 40.45% over the same period, the company shows significant top-line expansion, which could be indicative of its potential for future earnings growth.

Two key InvestingPro Tips for Acadia Pharmaceuticals include the fact that the company holds more cash than debt on its balance sheet and that net income is expected to grow this year. These points suggest a stable financial position and an optimistic outlook for profitability, aligning with UBS's confidence in the stock's potential despite the revised sales forecast for Daybue. Moreover, with analysts predicting that the company will turn a profit this year and the stock trading near its 52-week low, investors might consider this a strategic entry point.

For those looking to delve deeper into Acadia Pharmaceuticals' financial metrics and strategic analysis, InvestingPro offers additional insights. With the use of the special coupon code PRONEWS24, investors can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription. There are 5 more InvestingPro Tips available that can further inform investment decisions regarding Acadia Pharmaceuticals.

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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