Schrödinger (SDGR) Is Up 6.5% After Refocusing On Core Software Platform Over Drug Development - What's Changed

• Earlier this year, BofA Securities upgraded Schrödinger, Inc. after the company moved to prioritize its core software platform and scale back capital-intensive drug development, while KeyBanc reaffirmed a positive stance following discussions on product expansion and the software franchise.
• The shift toward a simpler, software-centric model reduces clinical complexity and cash consumption, sharpening the investment focus on Schrödinger’s higher-margin, recurring-revenue business.
• We’ll now examine how this renewed emphasis on the core software business could reshape Schrödinger’s investment narrative and risk profile.

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Schrödinger Investment Narrative Recap

To own Schrödinger, you need to believe its physics based software can become the main value driver, with drug discovery playing a supporting role. The recent broker upgrades largely reinforce this view, as the pivot toward a software centric model directly addresses the most immediate concern around cash burn, while leaving the key near term catalyst of software adoption and pricing intact. The biggest ongoing risk, in my view, is whether software growth can offset pressure on margins and losses quickly enough.

Against that backdrop, the FDA Fast Track designation and early Phase 1 data for SGR 1505 matter because they keep the optionality of milestone and royalty income alive, even as the company pulls back from capital heavy development. For investors, this helps frame the software business as the core driver, with a smaller but still meaningful upside from a de risked pipeline that could support longer term revenue diversification and help justify continued investment in the platform.

Yet investors should also be aware that while software is higher margin, the recent drop in software gross margin and continued losses mean...

Read the full narrative on Schrödinger (it's free!)

Schrödinger’s narrative projects $396.6 million revenue and $34.8 million earnings by 2028.

Uncover how Schrödinger's forecasts yield a $27.30 fair value, a 41% upside to its current price.

Exploring Other Perspectives

Seven fair value estimates from the Simply Wall St Community span roughly US$20.90 to US$43.20, underscoring how far apart views on Schrödinger can be. When you set those opinions against the renewed focus on the higher margin software franchise and ongoing pressure from rising costs and losses, it becomes clear why you may want to compare several perspectives before forming your own view on the company’s prospects.

Explore 7 other fair value estimates on Schrödinger - why the stock might be worth over 2x more than the current price!

Build Your Own Schrödinger Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Schrödinger research is our analysis highlighting 2 key rewards that could impact your investment decision.
• Our free Schrödinger research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Schrödinger's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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