Schrödinger, Inc. (NASDAQ:SDGR) is one of the best healthcare AI stocks to buy now. On December 15, BofA Securities upgraded Schrödinger, Inc. (NASDAQ:SDGR) from Neutral to Buy, with a $24 price target. BofA stated this move is a result of its growing optimism that Schrödinger’s recent pivot away from resource-heavy internal drug development toward its core software business is clearing the path for stronger, more predictable growth. BofA Upgrades Schrödinger (SDGR) to Buy After Strategic Pivot to Softwar ...

Core Viewpoint - Schrodinger, Inc. (SDGR) has seen a 5.4% increase in share price over the past four weeks, closing at $18.13, with a potential upside of 46.2% based on Wall Street analysts' mean price target of $26.5 [1] Price Targets - The average of 10 short-term price targets ranges from a low of $18.00 to a high of $33.00, with a standard deviation of $5.46, indicating variability among analysts [2] - The lowest estimate suggests a decline of 0.7% from the current price, while the highest estimate indicates an 82% upside [2] Analyst Consensus and Earnings Estimates - Analysts are optimistic about SDGR's earnings prospects, as indicated by a positive trend in earnings estimate revisions, which historically correlates with stock price movements [4][11] - The Zacks Consensus Estimate for the current year has increased by 6.4% over the past month, with one estimate rising and no negative revisions [12] Zacks Rank - SDGR holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13] Caution on Price Targets - While price targets are a common metric for investors, relying solely on them can be misleading, as analysts may set overly optimistic targets due to business incentives [3][8][10]

Schrodinger, Inc.'s ( SDGR ) stock has come under significant pressure in recent weeks, which seems to stem from weak fourth-quarter guidance. This situation is not necessarily surprising given that the demand environment remains challenging, and I do notRichard Durant is the leader of Narweena, an asset manager focused on finding market dislocations that are the result of a poor understanding of a businesses long-term prospects. Narweena believes that excess risk adjusted returns can be achieved by identif ...

Summary of Schrödinger Conference Call Company Overview - Schrödinger operates as a computational lab focused on molecular discovery, primarily in drug discovery, utilizing AI and simulation data to enhance experimental data accuracy [1][2] Financial Performance - Reported revenue for the quarter was $54 million, representing a 54% year-on-year growth - Software revenue was $40.9 million, growing 28%, while drug discovery revenue was $13.5 million - Total revenue guidance remains around $250 million, with software revenue expected to decrease slightly and drug discovery revenue to increase slightly [3][4] Business Model and Revenue Streams - Schrödinger monetizes its platform through three main avenues: software sales, collaborations with pharmaceutical partners, and internal drug discovery programs - The company has over 1,700 customers and 19 active collaborations, with seven internal drug discovery programs [2][3] Strategic Focus - The company is transitioning to a more R&D-focused model, emphasizing partnerships for advancing drug development rather than pursuing IND stage for internal assets [3][4] - The goal is to streamline operations and enhance profitability [4][28] Pipeline and Drug Development - Schrödinger has 15 programs entitled to milestones or royalties, with a collective milestone opportunity of $5 billion [5] - Upcoming data presentations include results from dose escalation studies for two clinical programs, MALT1 and WEE1/MYT1, with expectations of strong efficacy and safety profiles [19][20] Partnerships and Collaborations - Partnerships with major pharmaceutical companies like Novartis and Lilly have expanded significantly, leading to increased software licensing and usage [13][15] - Successful milestones from these partnerships are expected to open avenues for further collaborations and software licensing [16][32] Market Position and Competitive Advantage - Schrödinger's platform is distinguished by its physics-based approach, which does not rely on training sets, unlike many AI-driven drug discovery methods [8][10] - The company aims to leverage its unique capabilities in structure-based drug design to identify promising drug targets across various therapeutic areas [36][38] Financial Health and Future Outlook - As of the end of the quarter, Schrödinger had $401 million in cash, with significant cost optimization measures in place to extend its financial runway [40] - The company anticipates continued growth in software revenue and further partnerships in the next 12 to 24 months [12][32] Conclusion - Schrödinger is positioned for growth through strategic partnerships, a strong pipeline, and a focus on computational drug discovery, with a clear path towards profitability and operational efficiency [4][28][40]

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Group 1 - Schrödinger, Inc. is recognized as one of Bill Gates's top 15 stock picks, accounting for 0.29% of his stock portfolio [1] - On October 30, 2025, Schrödinger and Copernic Catalysts announced the successful completion of the final technical milestone for their ammonia synthesis catalyst, Neptune [2] - The new catalyst achieved over twice the ammonia yield compared to similar technologies and could increase industrial ammonia plant capacity by up to 47%, potentially generating $110 million in annual profits per plant while reducing energy consumption by 23% [3] Group 2 - Following the technical milestone, Schrödinger plans to collaborate on a selective ethylene oxide catalyst to enhance yield and reduce emissions in large-scale chemical production [3] - KeyBanc reiterated an "Overweight" rating on Schrödinger but lowered its price target from $30 to $28, citing mixed trends in healthcare IT spending while expressing confidence in the company's computational tools [4] - Schrödinger accelerates molecular discovery in life sciences and materials science through its development of physics-based computational software [5]

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Core Insights - Schrodinger, Inc. reported a quarterly loss of $0.45 per share, better than the Zacks Consensus Estimate of a loss of $0.75, representing an earnings surprise of +40.00% [1] - The company posted revenues of $54.32 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 8.68% and showing a year-over-year increase from $35.29 million [2] - Schrodinger shares have increased by approximately 3.6% since the beginning of the year, underperforming compared to the S&P 500's gain of 15.1% [3] Financial Performance - Over the last four quarters, Schrodinger has surpassed consensus EPS estimates two times and topped revenue estimates four times [2] - The current consensus EPS estimate for the upcoming quarter is $0.04 on revenues of $89.1 million, while for the current fiscal year, it is -$2.18 on revenues of $251.99 million [7] Industry Context - Schrodinger operates within the Zacks Medical Info Systems industry, which is currently ranked in the top 26% of over 250 Zacks industries, indicating a favorable industry outlook [8] - The performance of Schrodinger's stock may be influenced by the overall industry outlook, as empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions [5][8] Future Outlook - The company's earnings outlook will be crucial for assessing future stock performance, with management's commentary on the earnings call expected to provide insights [3][4] - The estimate revisions trend for Schrodinger was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, suggesting it is expected to perform in line with the market [6]

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $54 million, a 54% increase from Q3 2024, driven by strong execution across the business [5][9] - Software revenue was $40.9 million, representing a 28% year-over-year growth, exceeding expectations [5][10] - Drug discovery revenue was $13.5 million, up from $3.4 million in Q3 2024, reflecting successful execution across collaborations [10] - Net loss was $33 million, or $0.45 per diluted share, compared to a net loss of $38 million, or $0.52 per diluted share in Q3 2024 [11] Business Line Data and Key Metrics Changes - Software gross margin remained at 73% for both Q3 2025 and Q3 2024 [10] - R&D expenses decreased by 16% to $42.8 million from $51 million in Q3 2024, primarily due to lower employee-related expenses [10] - Sales and marketing expenses decreased by 8% to $9.5 million, while G&A expenses decreased by 13% to $21.7 million [10] Market Data and Key Metrics Changes - The company updated its software revenue growth guidance for 2025 to 8%-13% from 10%-15% due to delays in pharma scale-up opportunities [6][11] - Drug discovery revenue guidance was increased to $49-$52 million, slightly exceeding prior expectations of $45-$50 million [12] Company Strategy and Development Direction - The company is focusing on increasing customer adoption of its software, delivering scientific advancements, and advancing its therapeutics portfolio [9][20] - The decision was made to not advance internal discovery programs into the clinic independently, aiming to improve operational efficiency and long-term profitability [7][51] - The company plans to leverage partnerships for clinical development, allowing for a broader range of discovery programs [37][51] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term potential of the business despite current macroeconomic pressures [6][12] - There are early signs of recovery in the biotech sector, including capital markets and new capital formation, which could create additional opportunities [12] - The company remains committed to managing expenses and expects cash used in operating activities to be significantly lower than in 2024 [13][14] Other Important Information - The company has made significant improvements to its platform, including enhancements for challenging modalities and ongoing beta testing for predictive toxicology solutions [8][20] - The company has generated approximately $600 million in cash from collaborations and licensing activities since 2020 [20] Q&A Session Summary Question: Implications of reduced spend year over year - Management confirmed that a $30 million expense reduction was announced in May, with more than half achieved, aiming to improve profitability [23][24] Question: Software guidance and market slowdown - Management acknowledged a slowdown in customer discussions and delays in scale-up opportunities, leading to a slight reduction in software revenue guidance [27][30] Question: Predictive toxicology product monetization - The predictive toxicology solution is still in beta, with significant interest from customers, but it is too early to discuss monetization [32][33] Question: Discovery programs and partnerships - The company will continue to work on discovery stage programs and seek partnerships for clinical advancement, emphasizing the value of discovery partnerships [36][37] Question: Update on SGR-1505 and clinical data - Management provided updates on SGR-1505, highlighting a complete response in an aggressive lymphoma patient and upcoming data presentations [58][61] Question: NLRP3 inhibitor SGR-6016 progress - The company is excited about SGR-6016, a brain-penetrant NLRP3 inhibitor, and is in discussions with potential partners for its development [45][48] Question: Novartis partnership progress - Management reported excellent progress with Novartis, with teams working well together on program advancements [53][55]

Financial Performance - Total revenue reached $54.3 million, a 54% increase compared to the same period last year[11] - Software revenue grew by 28% to $40.9 million[11, 27] - Drug discovery revenue experienced significant growth, reaching $13.5 million[11, 27] - The company anticipates software revenue growth between 8% and 13% for the year[11] - Drug discovery revenue is projected to be in the range of $49 million to $52 million[11] - Software gross margins are expected to be between 73% and 75%[11] Strategic Updates - The company plans to complete Phase 1 dose escalation studies for SGR-1505 and SGR-3515[12, 31] - Initial Phase 1 data for SGR-3515 is expected in the first half of 2026[12, 25, 31] - The company is exploring strategic opportunities for SGR-1505 clinical development[12] - The company is phasing out independent clinical development activities[12]