Sanofi (NASDAQ: SNY) (EPA: SAN) stock was down 17% on the publication of the results.Those were good enough, about what was expected in fact. So too the guidance for the rest of this fiscal year, 2023. Not hugely exciting you understand, but good enough and in line with expectations. What caused the drop was the forecast for 2024 fiscal year - a decline in performance.
For those unaware, the Sanofi business is: “Sanofi, a healthcare company, engages in the research, development, manufacture, and marketing of therapeutic solutions in the United States, Europe, and internationally. It operates through Pharmaceuticals, Vaccines, and Consumer Healthcare segments. The company provides specialty care, such as dupixent, neurology and immunology, rare diseases, oncology, and rare blood disorders; medicines for diabetes and cardiovascular diseases; and established prescription products. In addition, it offers poliomyelitis, pertussis, and hib pediatric vaccines; influenza, booster, meningitis, and travel and endemic vaccines, which includes hepatitis A, typhoid, cholera, yellow fever, and rabies vaccines.” As we can imagine given recent events that includes a covid vaccine.
Sanofi stock price from Google Finance
As we say, the current year results were fair enough, in line with expectations at least. The problem comes in later time periods: “Sanofi shares plunged after a surprise forecast for lower profit next year overshadowed optimism about a plan to spin off the consumer health division. The stock dropped as much as 16% in Paris trading, a record, wiping €19.5 billion ($20.6 billion) from Sanofi’s market value. The drugmaker warned that increased investments in research and development and a tax-rate change will cause 2024 earnings to fall from 2023 levels.” Reuters seems to have got the year wrong but maybe they’re right after all: “Sanofi stock plunged on Friday, wiping 20 billion euros ($21 billion) off its market value, after it abandoned its 2025 profit target under a plan to list its consumer healthcare business to focus on its core innovative drugs business. "Sanofi is reviewing potential separation scenarios, but believes that the most likely path would be through a capital markets transaction, by creating a listed entity headquartered in France," the French drugmaker said in a statement.”
The point to remind ourselves of here. What matters to a stock price is the net present value of future earnings. So it is things in the future that matter, not things that have already happened. Current year results are interesting only as far as they guide us to those future ones. And, obviously, a cut in future earnings hurts a stock price right now.