Avantor can show near-term resilience before outperforming in the long term, according to RBC Capital Markets. Analyst Conor McNamara initiated coverage of the health care products stock at outperform. His $27 price target implies a 37.4% upside from where shares finished Tuesday. That would mark a turn for the stock, which has lost around 5% this year. “By following the ThermoFisher playbook— combining a global Life Science Tools (LST) distribution business with a leading LST product manufacturer—AVTR is in our view well positioned to emerge from the pandemic as a leading ‘one-stop shop’ to the biopharma industry,” he said in a note to clients Wednesday. AVTR YTD mountain Avantor Avantor is well-positioned for the long-term, McNamara said, as the life science tools sector is one of the most attractive in health care. That’s because the business area gives investors exposure to emerging technology with little risk, the analyst said. The company is also poised to benefit from a growing end market, he said, as the biopharmaceutical industry invests in the next wave of therapeutic classes such as cell and gene therapy and mRNA. Industry consolidation should also help Avantor as it should be able to increase capital allocation to support merger and acquisition work, McNamara said. That can also help improve core operating performance. McNamara said the company has the lowest exposure among its peer group to inventory drawdowns. And he said any near-term headwinds it will likely face are already priced into the stock. Though the price target would require the stock to trade at historical multiples relative to peers, McNamara said that would be justified after the company’s operating improvements in recent years. Multiples will eventually converge with peers, he said, leading to years of outperformance for the stock. Shares rose more than 1% in morning trading Wednesday. — CNBC’s Michael Bloom contributed to this report.
