On Friday, UBS analyst Chen Chen upgraded Wuxi Apptec (2359:HK) (OTC: WUXIF) stock from Neutral to Buy, setting a new price target of HK$70.40, up from the previous HK$40.10. This decision comes despite the company's third-quarter results for 2024 falling short of consensus and UBS's own estimates. The analyst pointed to signs of a potential turnaround for the company, highlighted by revenue and backlog growth.
Chen Chen believes that the recent Federal Reserve rate cuts combined with economic stimulus measures in China could bolster biopharma funding, potentially aiding the recovery of the Contract Research Organization (CRO) business. The analyst also noted the Biosecure Act, which is currently under consideration in the Senate, seems to have a limited impact on Wuxi Apptec in the short term. Moreover, there is uncertainty about whether the act will be passed within this year.
In response to these factors, UBS has increased its revenue, margin, and earnings per share (EPS) estimates for Wuxi Apptec for the years 2025 to 2028. These revised projections have led to the raised price target. The upgrade reflects a more optimistic outlook for the company's financial performance in the coming years.
The new price target of HK$70.40 represents a significant increase from the previous target and indicates a positive shift in UBS's expectations for Wuxi Apptec's stock performance. The upgrade to Buy suggests that UBS now sees a more favorable risk-reward balance for investors considering Wuxi Apptec shares.
Investors will be watching closely to see if the anticipated recovery in the CRO sector and the potential benefits from macroeconomic policies will materialize as expected, driving Wuxi Apptec's growth and justifying the upgraded outlook.
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