Stevanato Group S.p.A. (STVN): The Most Oversold Pharma Stock to Buy According to Analysts

Stevanato Group S.p.A. (STVN) has been on a rollercoaster ride in the past year, with its stock price plummeting by 30.50% over the last 52 weeks. However, analysts are bullish on the company, with an average price target of $27.5, indicating a potential upside of 31.58% from its current price of $20.90. This article explores the reasons behind STVN's oversold status and why analysts remain optimistic about its future prospects.



Why is STVN considered oversold?

Several factors contribute to STVN's current oversold status:

1. Stock Price Decline: The company's stock price has decreased by 30.50% over the last 52 weeks, which is a significant drop that has likely contributed to its oversold status.
2. Short Selling: The latest short interest is 3.41 million, representing 1.25% of the outstanding shares. This indicates that some investors are betting against the stock, which could be putting downward pressure on the price.
3. Valuation Ratios: The trailing PE ratio is 43.99, and the forward PE ratio is 36.76, which are relatively high compared to the industry average. This could be making the stock less attractive to some investors, contributing to its oversold status.
4. Earnings Miss: In the third quarter of 2024, adjusted EBITDA and EPS fell short of expectations due to under-utilization and higher costs in the Engineering division. This earnings miss could have contributed to the stock's decline.



Why are analysts bullish on STVN?

Despite the recent stock price decline and earnings miss, analysts remain optimistic about STVN's future prospects. Some reasons for their bullishness include:

1. Growth in High-Value Solutions: STVN's revenue from high-value solutions increased to 36% of total revenue in the third quarter of 2024, driven primarily by increased customer demand for high-performance syringes. This trend is expected to continue, as customers seek advanced and innovative drug containment and delivery solutions.
2. Expansion in the United States: STVN's new manufacturing facility in the United States is ramping up, with the Latina project being profitable at the gross profit level in the third quarter. The Fishers facility launched commercial production and generated its first commercial revenue. These investments are expected to contribute to the company's growth in the long term.
3. Growth in the Biopharmaceutical and Diagnostic Solutions (BDS) Segment: The BDS Segment grew 6% in the third quarter of 2024, driven by growth in high-value syringes and other products. This segment is expected to continue growing, supported by the increasing demand for biopharmaceutical products and diagnostic solutions.



Risks and Challenges

While analysts are bullish on STVN, investors should be aware of the potential risks and challenges the company faces:

1. Engineering Segment Challenges: The Engineering Segment experienced a 15% decline in revenue and a decrease in gross profit margin in the third quarter of 2024. The company is addressing these challenges through a business optimization plan, which may take time to yield positive results and could impact short-term performance.
2. Vial Destocking: The temporary effects of vial destocking, including underutilization of vial lines and lower revenue from more accretive EZ-fill® vials, negatively impacted the company's gross profit margin in the third quarter. While these effects are expected to gradually improve into 2025, they may continue to impact the company's financial performance in the short term.
3. Market Conditions: The pharmaceutical and biotechnology industries are subject to market conditions, regulatory changes, and competition. Adverse market conditions or increased competition could negatively impact STVN's growth and profitability.



Conclusion

Stevanato Group S.p.A. (STVN) is currently considered oversold by analysts, with a 52-week price change of -30.50% and a beta of 0.56, indicating lower price volatility compared to the market average. However, analysts remain bullish on the company's future prospects, citing growth in high-value solutions, expansion in the United States, and growth in the Biopharmaceutical and Diagnostic Solutions (BDS) Segment. Investors should be aware of the potential risks and challenges the company faces, such as challenges in the Engineering Segment, vial destocking, and market conditions. Despite these risks, STVN's long-term prospects appear promising, and the company is well-positioned for future growth.