On Friday, Morgan Stanley (NYSE:MS) adjusted its price target for Legend Biotech Corp. (NASDAQ: LEGN) shares, decreasing it to $82 from the previous $85. Despite the reduction, the firm maintains an Overweight rating on the stock.
The revision follows the assessment of Legend Biotech's recently reported quarterly results, which led to changes in the financial model used to evaluate the company's performance and prospects.
The key adjustments include a lowered expectation for 2024 worldwide sales of Carvykti, the company's cancer treatment drug. The forecast has been revised from over $1 billion to $850 million.
Morgan Stanley anticipates that sales growth for Carvykti will be stronger in the second half of 2024, aligning with management's commentary on the expected commercial acceleration of the product.
Moreover, Morgan Stanley has slightly increased its projection for near-term operating expenses in response to Legend Biotech's first-quarter results of 2024. This increase reflects the company's current spending patterns and is factored into the new valuation.
The financial institution's valuation model, specifically the discounted cash flow (DCF) analysis, has also been updated. This includes rolling forward the valuation date and the projection period, which are standard practices in financial modeling as new data becomes available.
The price target adjustment from $85 to $82 is a net result of these changes, indicating a modest shift in expectations based on the latest company performance and market conditions.
The Overweight rating suggests that Morgan Stanley still views Legend Biotech's stock as a favorable investment compared to others in the sector, despite the revised sales and expense projections.
InvestingPro Insights
In light of Morgan Stanley's recent adjustment to Legend Biotech Corp.'s price target, a closer look at the company's financial health and market performance through InvestingPro data could offer additional insights to investors. Legend Biotech, with a market capitalization of approximately $8.45 billion, shows a significant revenue growth of 206.05% over the last twelve months as of Q1 2024. This growth is a testament to the company's expanding sales, which could be a positive signal for investors looking at long-term value creation.
However, it's important to note that Legend Biotech's gross profit margin stands at a concerning -63.84%, reflecting the costs associated with its rapid expansion and development efforts. Additionally, the company's Price / Book ratio of 7.26 indicates that the stock is trading at a premium relative to the company's book value, which could be a point of consideration for value-oriented investors.
From an investment analysis perspective, two InvestingPro Tips suggest that while Legend Biotech holds more cash than debt, indicating a strong balance sheet, the company is not expected to be profitable this year. Furthermore, analysts have shown confidence by revising their earnings upwards for the upcoming period, which could be a sign of potential positive developments for the company. For a more comprehensive analysis, investors can explore additional tips on Legend Biotech through InvestingPro, which lists a total of 9 tips for a deeper dive into the company's fundamentals and projections. Remember to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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