On Monday, Rosenblatt Securities adjusted its outlook on Quad/Graphics (NYSE:QUAD), a global marketing solutions partner, by increasing the stock's price target to $10.30, up from the previous $7.70. The firm has also reiterated its Buy rating for the stock. This adjustment follows the company's investor day held on November 20, 2024, where Quad/Graphics presented an optimistic long-term guidance.
The company has projected that its sales trajectory could return to growth within three years, and it expects an increase in EBITDA margins by at least 100 basis points over the same period and between 140 to 640 basis points over five years. Additionally, Quad/Graphics highlighted its In-Store Connect initiative, which is anticipated to contribute to the company's overall improvement.
The analyst from Rosenblatt noted that there is substantial evidence supporting the company's growth prospects, prompting the firm to raise the enterprise value to EBITDA (EV/EBITDA) multiple estimates from 3.4x to 4.0x in their sum of the parts (SOTP) valuation. This adjustment has led to an increase of $2.60 in the stock's price target, which now stands 47% above the recent closing price.
The report also mentions the potential for significant upside to the new price target if the EBITDA multiple assumptions are moved even closer to peer levels or if Quad/Graphics outperforms the low-end of the guidance assumed. Moreover, the analyst suggests that the downside risks might be mitigated by the company's historical ability to maintain strong cost and capital structure discipline in challenging market conditions.
In other recent news, Quad/Graphics, Inc. reported a 4% decrease in net sales, totaling $675 million in the third quarter of 2024. Despite this, the company saw an increase in adjusted EBITDA to $59 million and adjusted diluted earnings per share rose to $0.26, up from $0.11 in the same quarter last year. The firm is undergoing a strategic shift towards becoming a marketing experience company, a transformation underscored by its plans to introduce AI-driven marketing solutions.
In terms of future expectations, Quad anticipates a full-year net sales decline of approximately 9% but expects an improved year-end net debt leverage of 1.5 times. The company is also set to streamline its business with the strategic sale of the majority of European print operations for $45 million.
These recent developments indicate Quad's commitment to innovation and operational efficiency, with a clear focus on enhancing client outcomes. As part of its transformation, the company has entered into a partnership with Google (NASDAQ:GOOGL) Cloud to bolster its AI and data capabilities. More details about Quad's strategy will be revealed during an Investor Day scheduled later this year.
InvestingPro Insights
Recent data from InvestingPro adds weight to Rosenblatt Securities' optimistic outlook on Quad/Graphics (NYSE:QUAD). The company's market cap stands at $365.35 million, with a notable price-to-book ratio of 7.18 for the last twelve months as of Q3 2024. This high P/B multiple aligns with the positive sentiment expressed in the analyst's report.
InvestingPro Tips highlight that Quad/Graphics has shown strong returns over the last month and three months, with price total returns of 38.16% and 49.26% respectively. This recent momentum supports the analyst's decision to raise the price target. Additionally, analysts anticipate that the company will be profitable this year, which could justify the higher EV/EBITDA multiple used in the Rosenblatt valuation.
It's worth noting that InvestingPro offers 11 additional tips for Quad/Graphics, providing investors with a more comprehensive analysis of the company's financial health and market position. These insights could be particularly valuable given the company's projected return to growth and margin expansion outlined in their investor day presentation.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.