Goldman Sachs has increased its price target on St. Jude (STJ) shares to $43 from $40 to reflect higher price earning ratio. But the brokerage maintained its Neutral rating as risk/reward are balanced though marginally skewed to the upside.
The action follows after the company’s analyst meeting. Analyst David Roman is concerned over STJ’s heavy exposure to declining end-markets. He also views that St. Jude needs to display higher clinical success on its pipeline before giving too much credit to earnings projections or the PE multiple.
The brokerage expects further clarity on pipeline during the major medical meetings in first half of 2012. Currently, the EPS estimate of consensus look to have come down enough.
Goldman Sachs does not see 2012 revenue outlook as overly conservative. The focus will be on the successful launch of new products and share gains from most of the portfolio. The brokerage sees more flexibility to meet or exceed current outlook of EPS.
The analyst wants more information on evidence of greater than expected share gains in CRM, positive data or greater clarity regarding pipeline products or a pull back in the stock for more constructive on STJ shares.
The brokerage lists share gains in ICDs, greater EBIT leverage, pipeline optionality for upside rewards, whereas pricing pressure, competitive share loss and clinical trial failure for downside risks.