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Why the Majority of Analysts Deem Novartis a ‘Buy’

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Dec. 4 2020, Updated 3:53 p.m. ET

Analysts estimates

Novartis (NVS) has undergone various changes through acquisitions and divestments over that past two years. Novartis met Wall Street analysts’ estimates for EPS (earnings per share) in 4Q16, reporting EPS of $1.12 as estimated but missing revenue estimates. Revenue came in at $12.32 billion, as compared to the estimate of $12.38 billion.

Analysts’ estimates also show that future revenues will rise ~1.6% to ~$11.8 billion in 1Q17 and fall ~1.2% to $12.3 billion in 2Q17.

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Annual estimates

Novartis surpassed annual estimates for EPS and reported annual EPS of $4.75 for 2016, as compared the estimated $4.72. However, Novartis missed revenue estimates and reported revenues of ~$48.5 billion, as compared to the estimated revenues of ~$48.8 billion for 2016.

Revenues are estimated to fall 0.3% to ~$48.4 billion in 2017 and then rise 4.5% to ~$50.6 billion in 2018.

Analysts’ recommendations

Novartis’s stock price has fallen nearly 7.2% in the past 12 months, but analysts estimate that the stock has a potential to return ~26% over the next 12 months. Wall Street analysts’ recommendations show a 12-month targeted price of $91.20 per share, as compared to the stock’s price of $72.30 per share on January 30, 2017.

Meanwhile, 60% of analysts recommend a “buy,” while 40% of analysts recommend a “hold.” It has been observed that these changes in analysts’ estimates and recommendations have been based on the changing trends in the stock price.

Notably, to divest risk, investors can consider ETFs like the SPDR S&P International Health Care Sector ETF (IRY), which has 11.5% of its total assets in Novartis, 5.1% in GlaxoSmithKline (GSK), 4.2% in Novo Nordisk (NVO), and 3.9% in Teva Pharmaceuticals Industries (TEVA).

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