On Thursday, Exane BNP Paribas (OTC:BNPQY) initiated coverage on De' Longhi SpA (DLG:IM) shares with a Neutral rating and a EUR30.00 price target. The firm acknowledged De' Longhi's leading position in the coffee machine market and its recent expansion into the professional coffee sector.
The coverage also highlighted the company's effective use of cash and its reasonable valuation, currently in the lower half of its historical range, marked at 13.5 times the forecasted FY25 earnings per share (P/E).
The analyst noted De' Longhi's consistent performance, including earnings beats in the first quarter of 2023, and the strategic acquisition of La Marzocco, a well-regarded name in the professional espresso machine space. Furthermore, the firm's capital markets day was mentioned as a positive catalyst that is now considered to be in the past.
Despite these achievements, the analyst pointed out that the momentum for earnings appears to be waning. The initiation of the Neutral stance reflects a tempered outlook, with an anticipation of an 8% upside to the price target. This suggests that while the firm sees some potential for growth, it also exercises caution due to the less supportive earnings momentum.
Exane BNP Paribas' position indicates a wait-and-see approach, recognizing De' Longhi's past successes but also considering the potential challenges ahead. The EUR30.00 price target is set with a view that the stock may offer moderate growth from its current valuation.
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