Novartis: Upside Increasingly Capped, 2026 Will Be A Transition Year (Rating Downgrade)

2026-01-25 08:31:35 ET

We have consistently maintained a supportive view on Novartis ( NVS ) ( NVSEF ), repeatedly highlighting upside in our analysis, which has been validated by the company’s successive upgrades to guidance. Here at The Lab, it was clear that " following the spin-off of its eye care business ( Alcon ) in April 2019, and its generics unit ( Sandoz ) in October 2023, Novartis is a pure-play innovative medicines business focused on oncology, immunology, neuroscience, and cardiovascular conditions. " The company valuation and margins were set to increase. This was combined with solid execution and the right capital allocation priorities: 1) acquisition and 2) a $10 billion share buyback (Fig. 1), maintaining its dividend payment and a solid balance sheet. Given the recent positive stock price performance, we believe Novartis is fairly priced. On a numbers basis, the company reached our target price, so we moved our rating to neutral....

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