Yeah, exactly. In principle, it goes like this:
In the analysis, a required rate of return (WACC) is given to the shares. If the difference between the current share price and the target price is > the required rate of return, then the recommendation is positive. If the difference is < WACC, then the recommendation is negative.
However, in drug development companies, WACC does not describe the company’s risk very well because a significant part of the risk is priced into risk-adjusted forecasts (i.e., the probability of research success) instead of WACC. Therefore, in these companies, the required rate of return is practically greater than WACC.