On Tuesday, Morgan Stanley (NYSE:MS) downgraded shares of NIBE Industrier AB (NIBEB:SW) (OTC: NDRBF), shifting its rating from Equalweight to Underweight and setting a new price target of SEK39.00. The firm cited several concerns about the company's earnings potential and market performance. According to Morgan Stanley, NIBE is likely to face challenges due to a combination of structural and cyclical headwinds.
The downgrade stems from issues such as weak demand in the company's Climate Solutions sector, which is expected to persist even as NIBE ramps up new capacity. Moreover, cyclical obstacles within the Elements and Stove segments are anticipated to affect the company's earnings negatively.
Morgan Stanley pointed out that the lack of positive near-term catalysts is a significant factor in the downgrade. This includes uncertainties related to political decisions on subsidies and gas boiler bans, the absence of clear strategies to achieve the company's EBIT margin guidance for FY25, and ongoing destocking problems.
Furthermore, the firm expressed concern over NIBE's limited potential for positive surprises in inorganic growth due to its high leverage, which is forecasted to be 5x by FY24.
The financial institution's analysis suggests that consensus earnings expectations for NIBE may not be met, which could lead to a reevaluation of the company's stock multiple. These factors contribute to Morgan Stanley's underweight rating, indicating a cautious outlook on the stock's near-term performance.
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