What happened
Catalent (CTLT 0.61%) investors are clearly an optimistic bunch, as lately they've been taking not-so-bad-news very positively and trading up the stock. This dynamic was clearly in force on Monday; despite a recommendation downgrade from a leading investment bank, the stock nevertheless rose on the day...if only slightly. It crawled 0.9% higher, which was good enough to match the S&P 500 index's modest rise.
So what
JPMorgan Chase's (JPM -0.45%) Julia Qin was the person behind the downgrade. She shifted her recommendation on Catalent stock to neutral; previously she ranked it as an overweight (buy, in other words). She also took a giant pair of scissors to her price target, reducing this by exactly 50% to $45 per share.
Catalent has been a troubled company of late, and caution is clearly warranted. Qin is concerned that the company has numerous accounting issues, and that its recent operational adjustments are only slight.
The analyst also pointed out the uncomfortable fact that Catalent very recently reduced its full-year 2023 guidance. It now expects $4.25 billion to $4.35 billion in revenue, notably down from the nearly $4.63 billion to almost $4.88 billion of its preceding guidance.
That was compounded by a steep reduction in projected earnings before interest, taxes, depreciation, and amortization (EBITDA). That line item is now forecast to be $725 million to $775 million for the year; formerly, the specialty healthcare company was guiding for $1.22 billion to $1.3 billion.
Now what
Yet Catalent stock actually rallied when that update was provided, and the resilient shares also fended off the blow of Qin's downgrade. The company has had far more discouraging news to report lately -- such as the most recent delay of its latest quarterly earnings release, and a potential stock market delisting.
The JPMorgan recommendation downshift is obviously a "no disastrous news is good news" situation, but that doesn't mean by any stretch that Catalent is in a good place right now.
