On Monday, UBS has revised its price target for Green Plains (NASDAQ:GPRE) Renewable Energy (NASDAQ:GPRE) shares, reducing it to $28.00 from the previous $31.00, while continuing to recommend the stock as a Buy.
The adjustment comes in response to the company's underperformance in the first quarter of 2024, along with softer ethanol margins and decreased pricing for corn oil and soybean meal, which affect the company's Hi-Pro segment.
The firm has also revised its EBITDA forecasts for Green Plains, lowering the 2024 expectation to $76 million from an earlier projection of $155 million. The estimate for 2025 has been adjusted to $278 million, down from the prior estimate of $336 million. These changes reflect the impact of the recent quarter's results and the anticipated market conditions for the company's products.
UBS's price target is derived from a 7.25x multiple applied to the next twelve months (NTM) EBITDA estimate for 2025, which has been revised to $278 million. The calculation also accounts for the subtraction of net debt and non-controlling interest (NCI) to arrive at the per-share value.
The analyst's commentary provided insights into the rationale behind the revised estimates and price target. The adjustments take into account the first-quarter miss and the broader industry challenges that have influenced Green Plains' revenue streams.
As the market processes this information, the new price target suggests UBS's continued confidence in the stock, albeit with tempered expectations due to the revised earnings and market conditions.
InvestingPro Insights
Following UBS's revised price target for Green Plains Renewable Energy (NASDAQ:GPRE), current InvestingPro data and insights offer additional context for investors considering the stock. With a market capitalization of $1.24 billion, the company's stock is trading near its 52-week low, a position which might attract investors looking for potential bargains. However, Green Plains is not expected to be profitable this year, as reflected by a negative P/E ratio of -15.55 based on the last twelve months leading up to Q1 2024. This aligns with UBS's cautious stance on the company's near-term earnings potential.
InvestingPro Tips suggest that Green Plains suffers from weak gross profit margins, currently at 5.63%, which could be a contributing factor to the company's underperformance. Moreover, the company has seen a significant revenue decline of 17.62% over the last twelve months as of Q1 2024, which may have influenced UBS's decision to revise its estimates. Despite these challenges, Green Plains has liquid assets that exceed its short-term obligations, providing some financial stability in the face of market headwinds.
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