Thursday, KeyBanc Capital Markets increased its price target for Lonza Group (LONN:SW) (OTC: LZAGY) shares to CHF 635 from CHF 610, while keeping an Overweight rating on the stock. The adjustment comes as the firm recognizes the company's guidance for low-teens fiscal year 2025 (FY25) contract development and manufacturing organization (CDMO) growth, reinforcing Lonza's strong fundamentals as a global CDMO leader.
The reassessment followed Lonza's second-half 2024 (2H24) update, which continued the positive outlook from the December investor day. Although Lonza's revenue was marginally below the consensus, its core EBITDA surpassed expectations. The FY25 guidance, which was reiterated, anticipates low-teens organic growth in constant currency for the core business. This growth rate is one of the highest among the large-cap companies KeyBanc covers.
Biologics, which accounts for approximately 69% of Lonza's CDMO revenue, experienced robust commercial demand, similar to the previous quarter. Additionally, the company reported strong contract signings, especially in the Small Molecule segment, and celebrated a second significant contract at the recently acquired Vacaville, California, biologics site.
With several commercial products like Casgevy and Mesoblast (NASDAQ:MESO) gaining traction, and conservative expectations for the Vacaville site's performance, KeyBanc's outlook for Lonza remains optimistic. The revised price target to CHF 635 reflects the latest 2H24 results and further details regarding the guidance for FY25. KeyBanc also released a revised model to incorporate these updates and projections.
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