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Wednesday, November 25, 2020

Novartis stock price falls to 7-month lows on lower sales

  • Novartis reported a jump of 8% in core net income to $3.47 billion, higher than $3.32 billion consensus
  • Sales climbed by 1% to $12.3 billion, but still lower than the $12.7 billion estimates
  • Shares fell about 3.7% on Tuesday hitting 73.35 to return to March lows

Shares of Novartis (SIX: NOVN) fell almost 4% Tuesday after the Swiss pharmaceuticals company reported lower-than-expected sales in the third quarter. 

Fundamental analysis: Higher income, lower sales

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Novartis elevated its operating profit outlook on Tuesday on predictions that healthcare systems would handle the second coronavirus wave better than the first.

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The drugmaker estimated to see a moderate double-digit 2020 operating income growth, versus the earlier guidance that predicted a low double-digit rate. Novartis expects its sales to grow by a mid-single-digit percentage, same as the previous forecast.

The company reported an increase of 8% in core net income to $3.47 billion, compared with consensus estimates of $3.32 billion in a Refinitiv poll. Sales climbed by 1% to $12.3 billion, lower than the $12.7 billion estimates.

Vas Narasimhan, the CEO of Novartis, warned that coronavirus-induced challenges still have the ability to sabotage 2020 targets. However, he also said that the healthcare systems have learned from their past mistakes during the first wave that resulted in the postponement of treatment and hurt sales of Novartis drugs.

“Healthcare systems have realized the impact the pandemic had … broadly on non-communicable diseases and overall preventative measures and screening measures,” he said. 

“There’s a strong desire not to repeat that.”

The drugmaker managed to elevate profitability through a strategy that included thousands of furloughs and has sold over a dozen factories since last year.

Severin Schwan, CEO of Roche said he doesn’t believe we will face another healthcare lockdown, in spite of resurgence in the number of coronavirus infections. Back in July, the company cut its 2020 sales guidance because of the coronavirus crisis.

Technical analysis: Return to pandemic levels

Despite the company’s claims that Q3 market circumstances were recuperating, Novartis share price doesn’t seem to be in the mood. Shares fell about 3.7% on Tuesday hitting 73.35 to return to March lows. 

Novartis stock price falls to 7 month lows on lower sales
Novartis stock chart (TradingView)

A daily close below the 75.00 handle would provide the selling side with control of the price action. In this case, they are likely to target 72.60 as their next target on the downside. 


Despite lifting its operating profit estimates and higher net income, Novartis’ sales missed the market’s expectations to push the stock almost 4% lower. 

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