Why Novo Nordisk Stock Topped the Market Today

Key Points

• An analyst upgraded his recommendation on the Danish pharmaceutical company.

• In his view, the Wegovy developer now ranks as a neutral.

• 10 stocks we like better than Novo Nordisk ›

Novo Nordisk (NYSE: NVO) is quite the divisive stock among both investors and analysts these days. Although its high-profile obesity drug Wegovy has been a raging success, the company is being rocked by competition from both a rival and numerous third-party drug compounders.

On Wednesday, however, one analyst became notably more bullish on the Danish pharmaceutical company, and investors took this to heart. Collectively they pushed the company's share price up by more than 2% today, handily beating the 0.3% increase of the bellwether S&P 500 index.

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An analyst makes an upgrade

Well before market open today, BNP Paribas Exane's Peter Verdult upgraded his recommendation on Novo Nordisk. This doesn't make him a bull on the stock, however, as he only moved it up from underperform (sell) to neutral. As he did so, he also lifted his price target from $54 per share to $61.

Image source: Getty Images.

According to reports, Verdult's adjustments were based on financial modeling that was updated to reflect the latest trends driving prescriptions, foreign exchange, and drug pricing.

Again, this doesn't make Novo Nordisk a buy for the analyst, but given the company's share-price slump and the fact that Verdult is anticipating growth in sales and compound earnings of 7% and 8%, respectively, he believes it is fairly priced now.

Shifting focus

Recently, Novo Nordisk announced measures to step up its legal fight against some compounders, indicating that it's focusing much of its attention on activities outside of drug development and commercialization. Still, Wegovy is a high-demand product, and the company remains tightly identified with weight loss treatments; this alone gives it significant value as an investment.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.