On Thursday, UBS analyst Patrick Rafaisz upgraded Forbo Holding AG (FORN:SW) stock from Neutral to Buy, despite lowering the price target from CHF1,090.00 to CHF1,050.00. Rafaisz cited the stock's decline to a 10-year low as an overly conservative reaction to the company's challenges.
Forbo Holding AG, which has seen its shares plummet to their lowest point in a decade as of 2025, is now considered undervalued according to UBS. The revised outlook suggests that the market has priced in a scenario of structurally contracting sales and margins, which UBS deems excessively pessimistic. The firm acknowledges that 2025 may be a transitional year for Forbo, but also notes that the headwinds the company faces are beginning to shift.
In the Flooring sector, there are signs of recovery as European non-residential building permits are stabilizing. Meanwhile, the Movement division is experiencing improving momentum in materials handling. UBS also expects Forbo's efforts to streamline operations, address operational challenges, and mitigate input cost pressures to support margin improvement.
The analyst highlighted Forbo's robust return on invested capital (ROIC) and strong balance sheet, which could allow for cash returns to shareholders and potential mergers and acquisitions. However, UBS has adjusted its earnings per share (EPS) forecasts for fiscal years 2024 to 2026 downward by an average of 8% to reflect a slower recovery. Despite the reduction in the price target to CHF1,050, UBS still sees a significant 40% upside from the current share price.
Investors are now looking ahead to the next potential catalyst for Forbo Holding AG, which will be the fiscal year 2024 results scheduled to be released on March 4.
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