Novartis (NVS) AI Stock Analysis

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Novartis

(NYSE:NVS)

80Outperform

Novartis demonstrates strong financial performance with solid profitability and cash flow generation. The technical indicators suggest the stock is in a bullish phase, and the valuation is reasonable with a good dividend yield. The earnings call provided a positive outlook, although potential risks from generic entries and study delays exist. Overall, the stock reflects a promising investment opportunity within the pharmaceutical industry.

Positive Factors

Financial Performance

Increased cash on the balance sheet has led to a modestly higher target price for Novartis.

Product Development

Cosentyx is maintaining its NBRx share despite increased competition and is expected to grow further with the approval of the HS indication and IV formulation.

Trial Results

Kisqali's NATALEE trial results have received positive feedback from physicians, indicating excitement for its use among eBC patients.

Negative Factors

Revenue Expectations

The target price implies modest upside from current levels, suggesting that revenue upside is mostly priced in.

Novartis (NVS) vs. S&P 500 (SPY)

Market Cap

$210.87B

Dividend Yield2.98%

Average Volume (3M)2.72M

Price to Earnings (P/E)18.8

Beta (1Y)0.36

Revenue Growth1.08%

EPS Growth-17.73%

CountryUS

Employees75,883

SectorHealthcare

Sector Strength65

IndustryDrug Manufacturers - General

Share Statistics

EPS (TTM)5.91

Shares Outstanding2,112,421,900

10 Day Avg. Volume2,572,491

30 Day Avg. Volume2,717,105

Financial Highlights & Ratios

PEG Ratio0.09

Price to Book (P/B)N/A

Price to Sales (P/S)4.28

Price to Cash Flow (P/CF)N/A

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$113.50

Price Target Upside1.21% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering5

Novartis Business Overview & Revenue Model

Company DescriptionNovartis AG researches, develops, manufactures, and markets healthcare products worldwide. The company operates through two segments, Innovative Medicines and Sandoz. The Innovative Medicines segment offers prescription medicines for patients and healthcare providers. It also provides ophthalmology, neuroscience, immunology, hepatology, dermatology, respiratory, cardiovascular, renal, and metabolism medicine products. The Sandoz segment develops, manufactures, and markets finished dosage form medicines; active ingredients and finished dosage forms of small molecule pharmaceuticals to third parties; and retail generics and anti-infectives. It also provides active pharmaceutical ingredients and intermediates primarily antibiotics; protein- or other biotechnology-based products, including biosimilars; and biotechnology manufacturing services. Novartis AG has a license and collaboration agreement with Alnylam Pharmaceuticals to develop, manufacture, and commercialize inclisiran; and a clinical collaboration with Kura Oncology, Inc. to evaluate the combination of Tipifarnib and Alpelisib in patients with head and neck squamous cell carcinoma. The company was incorporated in 1996 and is headquartered in Basel, Switzerland.

How the Company Makes MoneyNovartis generates revenue through multiple streams, primarily from the sale of its branded pharmaceuticals and generic and biosimilar products. The company operates through two major divisions: Innovative Medicines and Sandoz. The Innovative Medicines division, which includes patented prescription medicines, is the primary revenue driver, contributing a significant portion of Novartis's income by focusing on high-value therapeutics in areas such as oncology, cardiovascular health, and neuroscience. Sandoz, which provides generic and biosimilar medicines, offers a cost-effective alternative to branded drugs, adding to the company's revenue by catering to a broader market segment. Furthermore, Novartis invests heavily in research and development to foster innovation and bring new drugs to market, thereby sustaining its competitive advantage and revenue growth. Strategic partnerships and collaborations with other healthcare entities and technology companies also play a role in expanding the company's reach and enhancing its product offerings.

Novartis Financial Statement Overview

Summary

Novartis exhibits robust profitability and cash flow generation, with a well-managed balance sheet. The company has maintained strong profit margins and effective equity utilization, although revenue growth and leverage warrant monitoring to sustain long-term financial health.

Income Statement

Very Positive

Novartis has demonstrated strong profitability with a consistent gross profit margin above 70% and an improving net profit margin from 14.3% in 2020 to 23.1% in 2024. There is a notable EBIT margin growth from 20.4% in 2020 to 28.1% in 2024, indicating efficient operational management. However, the revenue growth has been relatively flat, with fluctuations over the years, posing a potential challenge for future growth.

Balance Sheet

Positive

The balance sheet shows a stable equity position with a debt-to-equity ratio of 0.71 in 2024, which is manageable for a pharmaceutical company. Return on equity is strong at 27.1% in 2024, reflecting effective utilization of equity capital. However, the equity ratio has decreased from 51.3% in 2021 to 43.1% in 2024, suggesting an increase in leverage.

Cash Flow

Positive

Free cash flow has grown steadily, with a significant increase from 2020 to 2024. The operating cash flow to net income ratio remains healthy, indicating strong cash generation relative to profits. However, free cash flow growth slowed in recent years, which could impact future investment capacity.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
51.72B	46.66B	51.83B	52.88B	49.90B
	Gross Profit
38.90B	34.19B	36.34B	37.01B	34.78B
	EBIT
14.54B	9.77B	9.20B	26.95B	10.15B
	EBITDA
20.71B	18.29B	14.73B	17.13B	15.24B
	Net Income Common Stockholders
11.94B	14.85B	6.96B	24.02B	8.07B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
13.35B	13.96B	18.93B	28.33B	11.56B
	Total Assets
102.25B	99.94B	117.45B	131.79B	132.06B
	Total Debt
31.26B	26.35B	27.96B	31.09B	38.05B
	Net Debt
19.80B	12.96B	20.45B	18.69B	28.39B
	Total Liabilities
58.12B	53.20B	58.03B	63.97B	75.39B
	Stockholders Equity
44.05B	46.67B	59.34B	67.66B	56.60B
Cash Flow		Free Cash Flow
13.80B	11.71B	11.56B	12.10B	11.06B
	Operating Cash Flow
17.62B	14.46B	14.24B	15.07B	13.65B
	Investing Cash Flow
-7.51B	5.60B	1.47B	4.21B	-13.18B
	Financing Cash Flow
-11.74B	-14.28B	-20.56B	-16.26B	-2.21B

Novartis Technical Analysis

Technical Analysis Sentiment

Positive

Last Price112.14

Price Trends

50DMA

108.39

Positive

100DMA

103.19

Positive

200DMA

106.19

Positive

Market Momentum

MACD

0.61

Negative

RSI

56.31

Neutral

STOCH

89.86

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NVS, the sentiment is Positive. The current price of 112.14 is above the 20-day moving average (MA) of 108.83, above the 50-day MA of 108.39, and above the 200-day MA of 106.19, indicating a bullish trend. The MACD of 0.61 indicates Negative momentum. The RSI at 56.31 is Neutral, neither overbought nor oversold. The STOCH value of 89.86 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for NVS.

Novartis Risk Analysis

Novartis disclosed 26 risk factors in its most recent earnings report. Novartis reported the most risks in the “Legal & Regulatory” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Novartis Peers Comparison

Overall Rating

UnderperformOutperform

Sector (51)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NVS	80 Outperform	$210.87B	18.79	26.33%	2.98%	1.08%	-17.73%
SNY	75 Outperform	$125.03B	21.43	7.34%	2.79%	-4.57%	2.96%
MRK	74 Outperform	$200.91B	11.62	40.81%	4.01%	4.26%	―
AZN	73 Outperform	$215.44B	30.65	17.60%	2.22%	18.03%	18.11%
PFE	68 Neutral	$129.20B	16.17	9.05%	7.55%	8.77%	272.80%
AMGN	60 Neutral	$150.46B	37.02	67.55%	3.26%	18.64%	-39.39%
Sector *	51 Neutral	$5.31B	3.33	-39.82%	2.92%	17.95%	1.84%

* Healthcare Sector Average

Performance Comparison

NVS

Novartis

112.14

17.57

18.58%

AMGN

Amgen

280.84

18.85

7.19%

AZN

AstraZeneca

69.57

-4.12

-5.59%

MRK

Merck & Company

82.74

-44.68

-35.07%

PFE

Pfizer

22.92

-0.98

-4.10%

SNY

Sanofi

52.32

4.64

9.73%

Novartis Earnings Call Summary

Earnings Call Date: Jan 31, 2025 | % Change Since: 10.30% | Next Earnings Date: Apr 29, 2025

Earnings Call Sentiment Positive

The earnings call presented a strong financial performance by Novartis with significant growth in key segments such as Entresto, Cosentyx, and Kisqali, along with robust pipeline advancements. However, there are concerns about potential generic entries impacting future performance and a delay in the OAV101 IT study. Overall, the positive achievements and growth in various segments outweigh the challenges highlighted.

Highlights

Strong Overall Financial Performance

Novartis reported a 16% sales growth and a 29% core operating income growth in Q4 2024 in constant currency. The full year saw a 12% sales growth and a 22% core operating income growth, achieving a margin of 38.7%.

Entresto Achievements

Entresto achieved $7.8 billion in sales for the full year, up 31%. U.S. sales grew by 41% with significant performance in heart failure and hypertension in China and Japan.

Cosentyx Performance

Cosentyx sales topped $6 billion for the full year, growing 25%. U.S. sales increased by 36%, driven by new launches in HS and IV.

Kesimpta Growth

Kesimpta grew 49%, reaching $3.2 billion in full-year sales. The U.S. market grew by 42%, with strong performance outside the U.S. growing at 67% in constant currency.

Kisqali Sales Increase

Kisqali grew 49% for the full year, reaching $3 billion in sales, with a significant increase in metastatic and early breast cancer settings.

Pluvicto Expansion

Pluvicto delivered $1.4 billion in full-year sales, with a 42% growth in constant currencies, focusing on expanding the PSMAfore launch.

Leqvio and Scemblix Growth

Leqvio showed 114% constant currency full-year growth. Scemblix grew 68%, becoming a market leader in the third-line CML setting.

Pipeline and Innovation Progress

Novartis made significant progress in its pipeline with key approvals and ongoing developments, aiming to maintain growth momentum into the 2030s.

Lowlights

Potential Generic Entries

Novartis anticipates potential generic entries for Entresto, Tasigna, and Promacta in the U.S. in mid-2025, which could impact financial performance.

OAV101 IT Study Delay

The STEER study for OAV101 IT was delayed due to event rate modeling, now expected to read out in the first half of 2025.

Company Guidance

During the Novartis Q4 2024 earnings call, several key metrics and guidance points were highlighted. Novartis reported a strong performance with Q4 sales growing 16% and core operating income increasing by 29% in constant currency. For the full year 2024, sales rose by 12% and core operating income grew by 22%, achieving a core margin of 38.7%. The company expressed confidence in continued growth, projecting a 5% plus sales guidance out to 2029 and mid-single-digit growth in the long term. Key products like Entresto, Cosentyx, Kesimpta, and Kisqali showed robust growth, contributing to these results. The call also addressed the expected impact of generic entries in 2025, with specific assumptions for Entresto's loss of exclusivity. Novartis anticipates mid to high single-digit sales growth and high single to low double-digit core operating income growth for 2025, despite potential generic impacts.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.