UBS’ Bottom Quant Stocks In AI, IT, Healthcare & Others: 29 Stocks In All Sectors

16. West Pharmaceutical Services, Inc. (NYSE:WST)

Number of Hedge Fund Investors In Q2 2024: 37

Sector: Healthcare

West Pharmaceutical Services, Inc. (NYSE:WST) is a sizable medical instruments firm that makes and sells products such as those used in syringes, cartridges, vials, and other drug delivery systems. As of H1 2024, 79% of the firm’s revenue comes from its packaging and drug delivery business. Consequently, the stock is down 7.25% year to date as demand for the firm’s products has slowed down in the midst of broader sluggishness in the biotechnology industry. Consequently, West Pharmaceutical Services, Inc. (NYSE:WST)’s recovery is dependent on overall pharma and biotech demand picking up as drug makers cycle through their existing inventory. However, there are key long-term catalysts for the firm, with the demand for injectables as evidenced by weight loss drugs capable of rising sustainably.

Baron Funds mentioned West Pharmaceutical Services, Inc. (NYSE:WST) in its Q3 2024 investor letter. Here is what the fund said:

“West Pharmaceutical Services, Inc. (NYSE:WST) manufactures components and systems for the packaging and delivery of injectable drugs. Shares fell on lower-than-expected financial results and reduced guidance for the year attributed to ongoing inventory destocking by its pharmaceutical customers. Post-pandemic, customers continue to use the inventory stockpiled to meet elevated pandemic-era demand. West was also able to shorten the lead time needed to meet new demand, giving customers confidence to safely reduce their inventory levels. We believe the inventory-related issues are temporary, and West remains a dominant player with competitive advantages in the growing market for injectable drugs. Management has stated that end-patient demand is in line with its expectations, market share shift is not occurring, and its win rates on packaging for new molecules remains strong. They expressed confidence that West can return to the long-term financial construct of 7% to 9% revenue growth with 100 basis points of operating margin expansion annually.”