UBS lowers target on Arcadia Pharmaceuticals stock, maintains buy rating

On Tuesday, UBS revised its outlook on Arcadia Pharmaceuticals shares, lowering its price target to $27 from the previous $33 while retaining a buy rating on the stock. The decision follows revisions to expected peak sales for the company's drug Daybue.

Analysts at the company pointed out that the reason for the reduction in Daybue's peak sales forecast is the revised one-year production outage rate forecast, which currently sets the peak sales forecast at $421 million, down from the original forecast of $940 million. The figure was also lower than the consensus estimate of $864 million. Still, analysts maintained a buy rating, showing confidence in the stock's potential.

UBS's valuation of Acadia Pharmaceuticals is based on a discounted cash flow (DCF) approach, which supports an enterprise value of 4.0x to projected 2029 sales. Even with Daybue's lower forecast, the drug is still valued at $5 in a revised DCF estimate, the analyst said. The remainder of the valuation is attributed to Nuplazid, valued at $8, and the company's pipeline assets, valued at $14.

Analyst commentary suggests that while estimates for Daybue are conservative, Acadia Pharmaceuticals' current market valuation provides investors with an attractive buying opportunity. The combined valuation considers the potential of the company's entire portfolio, including its pipeline assets, rather than focusing solely on Daybue's near-term prospects.

Investment Professional Insights

UBS's recent price target adjustment for Arcadia Pharmaceuticals may provide investors with further clarity on the company's financial health and future prospects. Acadia has a market cap of $2.82 billion and a negative price-to-earnings (P/E) ratio for the trailing 12 months through the fourth quarter of 2023, reflecting the company's current lack of profitability, according to InvestingPro. However, with revenue growing strongly at 40.45% during the same period, the company showed significant top-line expansion, which may indicate its potential for future earnings growth.

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Two key InvestingPro tips for Arcadia Pharmaceuticals include that the company has more cash than debt on its balance sheet and that net income is expected to grow this year. The points point to a stable financial position and a positive earnings outlook for the company, consistent with UBS's confidence in the stock's potential despite the revised sales forecast for Daybue. Additionally, analysts are predicting the company will turn a profit this year, and with the stock trading near its 52-week low, investors may view this as a strategic entry point.

For those looking to delve deeper into Acadia Pharmaceuticals' financial metrics and strategic analysis, InvestingPro provides additional insights.Use special coupon code PRONEWS24, investors who subscribe to Pro and Pro+ annually or every two years can receive an additional 10% discount. There are 5 additional InvestingPro Tips available to further inform your investment decision regarding Acadia Pharmaceuticals.

This article was generated with the support of artificial intelligence and reviewed by an editor. For more information, please see our terms and conditions.

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