Elanco Animal Health (ELAN) is set to see "accelerating" earnings before interest, taxes, depreciation, and amortization growth in 2026 even with "modest" share capture and low-single-digit same-store EBITDA growth and a "bleak" Zenrelia outlook, UBS said in a note Monday.

The investment firm said that "excessive focus" on the performance of Zenrelia overlooks the broader long-term growth drivers, including expansion into new verticals and easing selling, general, and administrative, or SG&A expenses. Zenrelia is a treatment indicated for canine allergic itch and inflammation.

UBS analysts said they believe there's a "strong potential for EBITDA recovery," versus "low downside risk," which presents a "compelling 3:1 skew, highlighting an attractive long opportunity at depressed levels."

The firm noted that the potential for EBITDA acceleration is supported by long-term gross profit levers and rapid deleveraging.

UBS initiated coverage of Elanco with a buy rating and a $18 price target.

Shares of Elanco were up 3.4% in recent trading.

Price: 12.91, Change: +0.41, Percent Change: +3.28