Why Novo Nordisk Stock Just Crashed
Key Points
Novo Nordisk plans to unveil 5 big new drugs in 5 years.
Novo will also grow sales by $23 billion in 10 years.
Is that good enough?
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Novo Nordisk (NYSE: NVO) stock tumbled 8.1% through 11:35 a.m. ET Monday, and it has only itself to blame.
Novo, you see, just told investors what to expect from its stock over the next five years -- and even the next 10 years! -- and investors aren't liking what they heard one bit.
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Novo in 2026-2030 -- and 2035, too
Between now and 2030, Novo Nordisk plans to launch more than five separate "multi-blockbuster" new drugs. The company thinks these new drugs will add more than 150 billion Danish Krone in annual sales -- about $23 billion.
That sounds impressive... until you consider that Novo Nordisk currently does nearly $330 billion in annual sales. Adding $23 billion to that over the next 10 years implies that Novo expects to grow sales by only 7% over that period -- which is a really conservative target.
Admittedly, Novoa also says it expects annual revenue growth from 2026 through 2030 to be "in line with industry peers," and to earn a "broadly stable operating margin" on its sales. Still, if all Novo is promising is performance no worse than the competition, then this doesn't really give investors a reason to prefer Novo stock over the competition!
Novo stock's big advantage: low expectations
But I can give you a reason:
Novo Nordisk stock costs only 10.7 times trailing earnings. The stock pays a generous 4.2% dividend yield that pays for about 40% of its valuation already. To be fairly priced, all Novo Nordisk really needs to do is grow earnings about 6% annually over the next five years.
Granted, most analysts expect only 2% annual growth from Novo, and management seems to be promising even less today. If Novo can jump these low bars, though, its stock could be a buy.
Should you buy stock in Novo Nordisk right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Novo Nordisk. The Motley Fool has a disclosure policy.
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