Bank of America Securities analyst Michael Ryskin has reiterated their neutral stance on SDGR stock, giving a Hold rating today.
Michael Ryskin’s rating is based on a comprehensive analysis of Schrodinger’s recent financial performance and forward-looking guidance. The fourth quarter sales for Schrodinger were lower than expected, primarily due to a reduced contribution from its Drug Discovery segment, which didn’t meet the predicted revenue. Although there was a year-over-year increase in total revenue, the Drug Discovery revenue was significantly below the Bank of America estimate. Additionally, the company reported a net loss greater than both Bank of America’s and Street’s expectations. Despite better-than-expected gross margins, particularly in the software segment, the bottom-line results were less favorable.
Looking forward to 2024, the company’s financial guidance was less optimistic than anticipated, especially in software sales growth, which is projected to be considerably lower than Bank of America’s earlier estimate. Management’s expectations for operational expenditure growth are moderate, and while the balance sheet remains healthy, there is an anticipated increase in operating cash burn year-over-year. These factors contribute to the reassessment of the potential upside of Schrodinger’s stock, leading to a reduction in the price objective and reinforcing the Neutral rating. Ryskin acknowledges Schrodinger’s potential but also notes that there remains uncertainty regarding the company’s growth trajectory and the realization of its full value, suggesting a cautious approach to the stock.
In another report released today, Goldman Sachs also maintained a Hold rating on the stock with a $28.00 price target.
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Schrodinger (SDGR) Company Description:
Schrödinger, Inc. provides chemical simulation software solutions to pharmaceutical industry. It operates through the Software and Drug Discovery business segments. The Software segment sells software to transform drug discovery across the life sciences industry, as well as to customers in materials science industries. The Drug Discovery segment offers diverse portfolio of preclinical and clinical programs, internally and through collaborations, that have advanced to various stages of discovery and development. Schrödinger was founded by Richard A. Friesner, William A. Goddard, III and Murco Ringnalda in August 1990 and is headquartered in New York, NY.
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