TDespite the strong start to the year on the stock exchanges, many stocks are far from their all-time highs. The stock market year 2022 was simply too weak for this and the price mortgage to be compensated for was too large. But there are exceptions. One of them is Novo Nordisk stock. The share price of the Danish insulin world market leader recently not only reached new highs, but also cracked the 1,000 Danish kroner mark for the first time.
It is not the case that Novo Nordisk is completely carefree as a group. In particular, the developments in the United States, the world’s most important market for diabetes drugs, dampened the mood in relation to business development. As part of the Inflation Reduction Act (IRA), Democrats and President Joe Biden managed to limit the price of insulin to $35 a month nationwide. However, only in the state health program Medicare, which only applies to patients over the age of 65 anyway. An extension of the price cap has failed so far – and it is likely to have an even harder time now that the Republicans narrowly secured a majority in the US House of Representatives in November. For them, such price caps tend to be seen as a product of socialism.
Strong operating result in 2022
But Novo Nordisk and the share price have been unfazed. Business has continued to be very good for the Danes, which reflects the latest balance sheet for 2022. In the 2022 financial year, group-wide sales rose by 26 percent to 177.0 billion Danish kroner (DKK, the equivalent of 23.8 billion euros). Adjusted for currency effects, growth was 16 percent. The operating result improved by 28 percent to 74.8 billion DKK. Things went particularly well in North America.
Shareholders will feel this success in their own portfolio. The dividend has increased to 12.40 DKK, after 10.40 DKK in the previous year. There is also a 12-month share buyback program worth DKK 28 billion. The management is also confident for the current financial year, so that further dividend increases could follow. Of these, Novo Nordisk has already completed 25 in series. Therefore, the company can be counted among the European Dividend Aristocrats. According to the management forecast, sales and operating profit are each expected to increase by 13 to 19 percent in constant currency in 2023.
Novo Nordisk share in long-term uptrend
Despite the upbeat outlook for Novo Nordisk, some analysts have some questions given the high valuation of Novo Nordisk stock. Jefferies, for example, raised the price target for Novo Nordisk from 625 DKK to 730 DKK, but left the rating at “Underperform”. The American analyst firm has priced in the large market potential in the obesity sector in the stock, while competition would intensify, so the reasoning.
Christopher Scherbaum
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Image: Christoph Scherbaum
In the research department of Deutsche Bank, on the other hand, an analyst commented on the 2022 figures with this sentence, among other things: Novo Nordisk has recently shown itself to be particularly strong where it matters. Meanwhile, Goldman Sachs is much more optimistic. After the publication of the balance sheet by Novo Nordisk, the target price went up from DKK 1,037 to DKK 1,200. The stock remains on the conviction buy list. According to Goldman Sachs, Novo Nordisk is one of the best positioned biopharma stocks as a fast-growing company.
This statement is supported by the price history of the share. Over the past ten years, an investment of EUR 10,000 in Novo Nordisk has turned into a handsome position of more than EUR 53,000. If you add the sober chart technique, then the positive price development should continue, because the long-term trend – measured by the 200-day line – is positive and the share shows clear strength.
It has been proven that investors with a long-term investment horizon do very well with Dividend Aristocrats. This is especially true when the company is in a crisis-proof area. This is (unfortunately) the case at Novo Nordisk due to the growing number of diabetics.