West Earnings: Valuation Lowered After Guidance Disappoints and Recovery Trajectory Delayed

Wide-moat West Pharmaceuticals reported in-line results but provided 2025 guidance that was significantly below our expectations, putting a dent in the company’s recovery story. The disappointing guidance is primarily due to margin dilution from its SmartDose wearable injector and loss of sales of continuous glucose monitoring, or CGM, devices. Shares fell 38% the day after this news, which we think is an overreaction. However, we have cut our fair value estimate to $310 per share from $378 to factor in uncertainty on midterm operating margins. Overall, we think West's long-term growth story is intact and view the selloff as a long-awaited buying opportunity for a high-quality stock that had been trading at full valuations until now.