On Thursday, Morgan Stanley shifted its stance on Edenred (EPA:EDEN:FP) (OTC: EDNMY), raising the stock from Equalweight to Overweight, despite reducing the price target to €51.00 from €55.00. The upgrade reflects the firm's confidence in the continued robust fundamental performance of the company.
Edenred, known for its prepaid corporate services, has demonstrated a solid growth trajectory, with a compound annual growth rate (CAGR) of 12/14% in revenue/EBITDA during the current CEO's nine-year leadership. The company's like-for-like revenue growth was notably strong in the first half of the year, with a 17% increase in Q1 and a 14% rise in Q2. Morgan Stanley anticipates a 13% growth in the second half of the year.
While acknowledging certain headwinds, such as the impact of a falling interest rate environment on float revenue growth and a lower inflation environment potentially reducing face value benefit, Morgan Stanley believes these factors are already well understood by the market.
The firm's outlook remains positive, with the expectation that Edenred's strategic "Beyond" targets, including a minimum of 12% like-for-like EBITDA growth, are within reach. Morgan Stanley forecasts an 11% EBITDA growth, slightly below the consensus of 12%, which is expected to translate into a 16% growth in earnings per share (EPS).
The analyst's commentary underscores the company's strong fundamental performance and the belief that despite some economic challenges, Edenred's strategic goals are attainable. This optimistic forecast for Edenred is based on the company's consistent revenue and EBITDA growth, as well as its strategic initiatives aimed at sustaining this momentum.
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