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Sanofi Stock Up Almost 23% in 3 Months: Buy, Sell or Hold?
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Sanofi’s (SNY - Free Report) stock has gained 22.7% in the past three months compared with an increase of 2.9% for the industry. The stock has also outperformed the sector and the S&P 500 index as seen in the chart below.
SNY Stock Outperforms Industry, Sector & S&P 500
Image Source: Zacks Investment Research
The stock has also been consistently trading above its 50-day and 200-day moving averages since the end of June.
One of the main reasons for the stock price increase in the past three months was Sanofi’s increase in earnings growth expectations for 2024, announced along with the second-quarter earnings release in July.
Sanofi possesses a diversified product portfolio with a presence in several therapeutic areas, including cardiovascular diseases, diabetes, oncology, and immunology, among others. Sanofi has also been progressing with new product launches. Sanofi’s immunology drug Dupixent has become a key top-line driver on strong demand trends. The company also possesses a leading vaccine portfolio. It has launched several new drugs in the past couple of years and accelerated its mid- and late-stage pipeline this year. It has also been active on the M&A front.
Let’s understand the factors in detail to better analyze how to play the stock following the price increase in the past three months.
SNY Ups Earnings Growth Expectations
Sanofi improved its earnings growth expectations for 2024 from a decline in the low single-digit range to stable on a constant currency rate (“CER”) basis. The increase in guidance was based on a strong performance in the first half and an optimistic outlook for the second half of the year. Investors cheered the guidance increase as Sanofi had said last year that it expected profits to decline in 2024 due to higher R&D costs and taxes.
Sanofi’s top-line performance was impressive in the second quarter. Its sales rose 10.2% at CER. The company recorded double-digit year-over-year growth at CER after quite a few quarters, driven by higher sales of Dupixent and contributions from new products like Altuviiio and Nexviazyme.
Dupixent: A Key Top-Line Driver for SNY
Dupixent is now annualizing at close to €11.0 billion in sales after almost eight years on the market. Sanofi expects Dupixent to achieve more than €13 billion in sales in 2024 and a low double-digit CAGR till 2030. Dupixent is now approved in several countries, including the United States and EU, for five type II inflammatory diseases, namely severe chronic rhinosinusitis with nasal polyposis, severe asthma, moderate-to-severe atopic dermatitis, eosinophilic esophagitis and prurigo nodularis. Dupixent was approved for its sixth indication — chronic obstructive pulmonary disease (COPD) — in Europe in July 2024.In the United States, a supplemental biologics license application (sBLA) seeking approval of Dupixent for COPD is under review with the FDA. The FDA’s decision is expected later this month.
Dupixent’s strong sales growth is being driven by demand across all geographies, newly approved indications and demographics. With multiple approvals for new indications like COPD and expected expansion in younger patient populations, its sales are likely to be higher.
SNY Boasts a Strong Vaccine Segment
Sanofi possesses one of the world’s leading vaccine operations, with total annual sales of more than €5 billion in the past five years. Its Vaccines unit has delivered mid-to-high-single-digit sales growth since 2018. Sanofi continues to expand its vaccine business further. Sanofi has at least five vaccine candidates, which are expected to enter phase III development by 2025. Sanofi expects annual net sales to be more than €10 billion from its Vaccines unit by 2030 backed by its innovation efforts. In 2024, Sanofi expects its Vaccine business to grow in the mid-single-digit range.
SNY’s New Products & Strong Pipeline Can Drive Long-Term Growth
Sanofi recently launched some interesting new products with the most important being novel recombinant factor VIII therapy, Altuviiio and Beyfortus/nirsevimab antibody for respiratory syncytial virus (RSV) protection in all infants (in partnership with AstraZeneca [(AZN - Free Report) ]).
Sanofi is investing in these launches to optimize their success. Sanofi believes that its three new products launched/added in 2023, Altuviiio, Beyfortus and Tzield (added from the April 2023 acquisition Provention Bio), together can add up to at least €5 billion in peak sales. Beyfortus, Altuviiio and Tzield generated sales of more than €700 million in 2023, exceeding the company’s expectations. Sanofi expects Beyfortus to reach blockbuster sales in 2024.
Sanofi has a strong immunology and neuro-inflammation pipeline, which includes 12 potential blockbuster assets in phase III development, including amlitelimab, frexalimab and tolebrutinib. Sanofi expects to have more than 35 projects in phase III by 2025.
SNY’s Attractive Valuation & Rising Estimates
From a valuation standpoint, Sanofi appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 12.34 forward earnings, lower than 19.77 for the industry. The stock is also much cheaper than other large drugmakers like Novo Nordisk (NVO - Free Report) and Lilly (LLY - Free Report) .
SNY Stock Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2024 earnings has risen from $4.14 per share to $4.25 per share over the past 60 days. For 2025, earnings estimates have risen from $4.72 to $4.82 per share over the past 60 days.
SNY Estimate Movement
Image Source: Zacks Investment Research
Stay Invested in SNY Stock
Sanofi faces its share of headwinds like generic erosion of key drug Aubagio in all key markets and lower sales from mature products which are hurting sales. Other headwinds include the weak performance of diabetes drugs and regular negative pipeline developments.
However, Sanofi’s reasonable valuation, rising estimates, improving top-line performance, potential contributions from new product launches and positive pipeline progress are good enough reasons for those who own this Zacks Rank #3 (Hold) stock to stay invested.
Image: Bigstock
Sanofi Stock Up Almost 23% in 3 Months: Buy, Sell or Hold?
Sanofi’s (SNY - Free Report) stock has gained 22.7% in the past three months compared with an increase of 2.9% for the industry. The stock has also outperformed the sector and the S&P 500 index as seen in the chart below.
SNY Stock Outperforms Industry, Sector & S&P 500
The stock has also been consistently trading above its 50-day and 200-day moving averages since the end of June.
One of the main reasons for the stock price increase in the past three months was Sanofi’s increase in earnings growth expectations for 2024, announced along with the second-quarter earnings release in July.
Sanofi possesses a diversified product portfolio with a presence in several therapeutic areas, including cardiovascular diseases, diabetes, oncology, and immunology, among others. Sanofi has also been progressing with new product launches. Sanofi’s immunology drug Dupixent has become a key top-line driver on strong demand trends. The company also possesses a leading vaccine portfolio. It has launched several new drugs in the past couple of years and accelerated its mid- and late-stage pipeline this year. It has also been active on the M&A front.
Let’s understand the factors in detail to better analyze how to play the stock following the price increase in the past three months.
SNY Ups Earnings Growth Expectations
Sanofi improved its earnings growth expectations for 2024 from a decline in the low single-digit range to stable on a constant currency rate (“CER”) basis. The increase in guidance was based on a strong performance in the first half and an optimistic outlook for the second half of the year. Investors cheered the guidance increase as Sanofi had said last year that it expected profits to decline in 2024 due to higher R&D costs and taxes.
Sanofi’s top-line performance was impressive in the second quarter. Its sales rose 10.2% at CER. The company recorded double-digit year-over-year growth at CER after quite a few quarters, driven by higher sales of Dupixent and contributions from new products like Altuviiio and Nexviazyme.
Dupixent: A Key Top-Line Driver for SNY
Dupixent is now annualizing at close to €11.0 billion in sales after almost eight years on the market. Sanofi expects Dupixent to achieve more than €13 billion in sales in 2024 and a low double-digit CAGR till 2030. Dupixent is now approved in several countries, including the United States and EU, for five type II inflammatory diseases, namely severe chronic rhinosinusitis with nasal polyposis, severe asthma, moderate-to-severe atopic dermatitis, eosinophilic esophagitis and prurigo nodularis. Dupixent was approved for its sixth indication — chronic obstructive pulmonary disease (COPD) — in Europe in July 2024.In the United States, a supplemental biologics license application (sBLA) seeking approval of Dupixent for COPD is under review with the FDA. The FDA’s decision is expected later this month.
Dupixent’s strong sales growth is being driven by demand across all geographies, newly approved indications and demographics. With multiple approvals for new indications like COPD and expected expansion in younger patient populations, its sales are likely to be higher.
SNY Boasts a Strong Vaccine Segment
Sanofi possesses one of the world’s leading vaccine operations, with total annual sales of more than €5 billion in the past five years. Its Vaccines unit has delivered mid-to-high-single-digit sales growth since 2018. Sanofi continues to expand its vaccine business further. Sanofi has at least five vaccine candidates, which are expected to enter phase III development by 2025. Sanofi expects annual net sales to be more than €10 billion from its Vaccines unit by 2030 backed by its innovation efforts. In 2024, Sanofi expects its Vaccine business to grow in the mid-single-digit range.
SNY’s New Products & Strong Pipeline Can Drive Long-Term Growth
Sanofi recently launched some interesting new products with the most important being novel recombinant factor VIII therapy, Altuviiio and Beyfortus/nirsevimab antibody for respiratory syncytial virus (RSV) protection in all infants (in partnership with AstraZeneca [(AZN - Free Report) ]).
Sanofi is investing in these launches to optimize their success. Sanofi believes that its three new products launched/added in 2023, Altuviiio, Beyfortus and Tzield (added from the April 2023 acquisition Provention Bio), together can add up to at least €5 billion in peak sales. Beyfortus, Altuviiio and Tzield generated sales of more than €700 million in 2023, exceeding the company’s expectations. Sanofi expects Beyfortus to reach blockbuster sales in 2024.
Sanofi has a strong immunology and neuro-inflammation pipeline, which includes 12 potential blockbuster assets in phase III development, including amlitelimab, frexalimab and tolebrutinib. Sanofi expects to have more than 35 projects in phase III by 2025.
SNY’s Attractive Valuation & Rising Estimates
From a valuation standpoint, Sanofi appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 12.34 forward earnings, lower than 19.77 for the industry. The stock is also much cheaper than other large drugmakers like Novo Nordisk (NVO - Free Report) and Lilly (LLY - Free Report) .
SNY Stock Valuation
The Zacks Consensus Estimate for 2024 earnings has risen from $4.14 per share to $4.25 per share over the past 60 days. For 2025, earnings estimates have risen from $4.72 to $4.82 per share over the past 60 days.
SNY Estimate Movement
Stay Invested in SNY Stock
Sanofi faces its share of headwinds like generic erosion of key drug Aubagio in all key markets and lower sales from mature products which are hurting sales. Other headwinds include the weak performance of diabetes drugs and regular negative pipeline developments.
However, Sanofi’s reasonable valuation, rising estimates, improving top-line performance, potential contributions from new product launches and positive pipeline progress are good enough reasons for those who own this Zacks Rank #3 (Hold) stock to stay invested.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.