After a disappointing Capital Markets Day, Lonza shares plunged around 16% yesterday.
Special effects weigh on the company due to the Moderna contract termination. Due to the termination fee of CHFm 200 paid 2023, 2023 outlook is now higher but 2024 will be much lower due to lost Moderna sales, which were highly profitable. Therefore, a difficult 2024 has to be expected and this is negative, as expectations were clearly higher than consensus and what management communicated earlier. As the 2024 outlook is now much lower, also the mid-term outlook is more cautious than the estimates, which is disappointing. As a growth company, Lonza will not grow 2024, which is negative and in the mid-term, profitability is lower due to a lower base. In the long-term, we see Lonza as a beneficiary of the outsourcing of new drug production by pharma companies and as an interesting investment case. Considering the recent stock price correction and a mixed outlook in the mid-term, a Callable Barrier Reverse Convertible on Lonza can be attractive as it provides a conditional downside protection in addition to the coupon.
Source: Vontobel Equity Research (2023)
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