On Thursday, Citi announced an upgrade in the stock rating of Jungheinrich AG (ETR:JUNG_p) (JUN3:GR), shifting from Neutral to Buy. The firm maintains a price target of EUR32.00 for the company's shares. This decision comes after a period of notable underperformance by Jungheinrich in 2024, leading analysts to consider the stock undervalued.
According to Citi, despite the conservative estimates that suggest a high single-digit EBIT downside in 2025 compared to the consensus, Jungheinrich's shares are trading at approximately 9.5 times the projected 2025 earnings per share. This valuation represents a discount when compared to the average price-to-earnings ratio of 11 times observed during 2022-2023 and well below the average of 14 to 15 times since 2017.
The firm's analysis suggests that the current stock price reflects expectations for a significant decline in earnings, a scenario that analysts at Citi do not anticipate occurring. They believe that if Jungheinrich can show a relatively stable performance, and if the market sentiment towards European cyclical stocks improves even slightly from the current lows, there could be a potential for a catch-up trade in the first half of the year.
Citi's outlook is based on the premise that the current market valuation of Jungheinrich does not accurately reflect the company's earnings potential. They argue that the stock is priced as if a major earnings drop is on the horizon, which they find unlikely. This mismatch in valuation versus performance expectations is the basis for the upgrade to a Buy rating.
The upgrade by Citi could signal to investors a potential undervaluation in Jungheinrich's stock, suggesting that the company's financial health may be more robust than the market currently recognizes. With the maintained price target of EUR32.00, Citi indicates their belief that the stock has room to grow from its current trading price.
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