On Friday, BMO Capital adjusted its stock price target for Azek Co. (NYSE: AZEK), a company specializing in the manufacturing of building materials. The firm reduced the target to $46.00 from the previous $50.00 while maintaining a Market Perform rating on the stock.
The revision follows Azek's third fiscal quarter of 2024, which outperformed expectations. The company's success was attributed to several factors, including gains in shelf space, a more significant proportion of professional business, and a portfolio leaning towards the premium segment of the decking products market. The analyst from BMO Capital noted positive remarks during the earnings call regarding demand and inventory levels.
Despite these favorable aspects, there are concerns about the future, particularly in the repair and remodeling (R&R) sector. Recent channel checks indicated a softening in demand, and a competitor, Trex, reported a slowdown in the underlying demand for their products. These factors contribute to a sense of uncertainty in the market.
BMO Capital's decision to maintain the Market Perform rating reflects this cautious outlook. The price target has been adjusted to $46.00, which is based on 18 times the firm's forecasted FY25 EBITDA, indicating an expectation of multiple compression in the coming period.
The new price target and ongoing rating suggest that while Azek has been performing well, wider market trends and industry signals point to potential challenges ahead. The company's stock will continue to be monitored against the backdrop of a shifting demand in the R&R market.
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