On Tuesday, Citi updated its stance on GrafTech International Ltd. (NYSE:EAF) shares, increasing the price target to $2.20 from the previous $1.00, while maintaining a Neutral rating on the stock. The adjustment follows the company's third-quarter results for the year 2024.
Currently trading at $1.86, the stock has shown significant volatility, with a -11.85% decline over the past week despite a 24.83% gain over the last six months. InvestingPro data reveals several challenges facing the company, including weak gross profit margins and significant debt concerns.
The analyst cited the latest 8-K filing by GrafTech, which presented an EBITDA estimate for the year 2025 ranging from a $28 million loss to a $31 million gain. This projection aligns with the analyst's expectations of a near breakeven EBITDA for the company.
GrafTech's volume and costs are anticipated to improve, although the average realized price is likely to be lower due to the expiration of legacy contracts with higher prices. The company's current EBITDA stands at -$24.9 million for the last twelve months, with a concerning gross profit margin of -4.88%.
GrafTech expressed a cautious optimism that spot prices could see an upward trend in the first half of 2025. This follows a 20% price increase by Resonac™ in September 2024. However, the impact of the price changes is expected to vary by region.
The company has also taken steps to restructure its debt, which has significantly extended its liquidity runway. As a result, Citi has removed the 50% liquidity discount previously applied to GrafTech's valuation, leading to the new price target of $2.20 per share.
Despite the price target increase, Citi's stance remains Neutral with a High Risk classification. The firm acknowledges that while the electrode market is at a low point and poised for recovery, there is still limited visibility and ongoing challenges for GrafTech.
In other recent news, GrafTech International reported mixed results for the third quarter of 2024. Despite market challenges, the company saw a 9% year-over-year increase in sales volume, hitting 26,000 metric tons, and a substantial 28% reduction in cash costs per metric ton. However, the weak pricing environment resulted in a net loss of $36 million for the quarter.
BMO Capital maintained a Market Perform rating on GrafTech's shares, doubling the price target from $1.00 to $2.00, citing an improved liquidity position due to a recent capital agreement. Despite ongoing demand and pricing challenges, the analyst noted an expectation of some demand recovery by 2025. GrafTech also announced a $275 million financing transaction to enhance liquidity and extend debt maturities.
The company anticipates low double-digit sales volume growth in 2025 and plans to expand production capacity at the Seadrift facility. These are recent developments that reflect GrafTech's resilience in challenging market conditions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.