On Thursday, DA Davidson reaffirmed its positive stance on Custom Truck One Source (NYSE: CTOS), maintaining a Buy rating and a $10.00 price target for the company's shares. The endorsement follows recent investor meetings with CTOS management, which bolstered the firm's confidence in the stock's potential. The analyst highlighted that despite the challenges in the Transmission segment, there have been no cancellations of work, merely a shift to future periods. Additionally, recent regulatory changes, some emerging this week, are seen as beneficial for the company.
The analyst noted that while the Transmission business is currently facing headwinds, the situation is not as dire as it may seem. There is an expectation that the work will be completed in later periods, indicating a delay rather than a loss of business. This perspective suggests a temporary setback rather than a long-term issue.
Moreover, the analyst pointed out that the actual order numbers for Custom Truck One Source might be more robust than recent reports suggest. This is attributed to intra-quarter book-and-ship activities that could indicate underlying strength in the company's order book that isn't immediately apparent from quarterly figures.
Looking ahead, the analyst mentioned the possibility of emissions-related pre-buying affecting the company as early as 2025, a year sooner than previously anticipated. This potential development could provide an additional boost to Custom Truck One Source's business.
In conclusion, DA Davidson's reiterated Buy rating and $10 price target reflect a belief in the undervaluation of Custom Truck One Source shares. The firm sees the stock as significantly mispriced and anticipates positive outcomes based on the company's recent activities and upcoming regulatory environment changes.
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