Bank of America downgraded West Pharmaceutical Services (NYSE:WST) to Neutral from Buy on Friday, citing supply-side headwinds and pressure on COVID-19-related sales after the life sciences company reported its Q3 2022 results.
West Pharma (WST) fell more than 13% on Thursday after the company's quarterly results fell short of Street forecasts, and its updated outlook stood below the consensus.
BofA analysts led by Derik de Bruin favor West Pharma's (WST) competitive positive and think its long-term market fundamentals are attractive.
However, the team argues that WST's supply-side issues, which started in late Q3 due to capacity constraints and unexpected complexity in resource allocation to non-COVID-related products, would last until at least early 2023, when additional capacity is expected.
The analysts also point to the company's decision to increase the projection for FY23 COVID-related sales decline.
Despite a potential improvement in supply side issues over 2023, "the converging headwinds make it difficult to see how WST can avoid a material margin and EPS contraction in the coming year," the analysts wrote, slashing the price target in the stock to $250, from $385 per share.
Wall Street has remained bullish on West Pharma (WST) stock, with an average rating of Buy from analysts. However, Seeking Alpha Author ratings and Seeking Alpha's quant system, which consistently beats the market, rated WST as a Hold.