Baird downgrades GMS stock rating to neutral on acquisition bid dynamics

Investing.com - Baird downgraded GMS Inc . (NYSE:GMS) from outperform to neutral on Monday, while raising its price target to $95.00 from $93.00 following recent acquisition developments. The company, currently valued at $3.8 billion, is trading at a P/E ratio of 34.3x, significantly above historical averages.

The downgrade comes after GMS shares traded sharply higher in response to QXO’s bid for the company, as well as reports from The Wall Street Journal and Bloomberg about a rumored offer from Home Depot (NYSE:HD), though no details or confirmation have been provided. According to InvestingPro data, the stock’s RSI indicates overbought conditions, with additional insights available in the Pro Research Report.

Baird considers it unlikely that a competing Home Depot bid would be materially above GMS’s current share price, creating a negative risk/reward scenario at current trading levels.

The investment firm also noted that QXO and other strategic and financial players are unlikely to enter a bidding war for the specialty building products distributor.

GMS, which distributes wallboard, ceilings, steel framing and complementary construction products, has seen its stock price climb significantly since the acquisition interest became public. The stock has surged 31.7% in the past week alone, now trading near $100, close to its 52-week high of $105.54.

In other recent news, GMS Inc. has been the subject of multiple acquisition offers, notably from QXO and Home Depot. QXO made an all-cash offer of $95.20 per share, valuing GMS at approximately $5 billion. Following this, RBC Capital raised its price target for GMS to $95.20, aligning with QXO’s offer. Truist Securities and Loop Capital have also adjusted their price targets, with Truist setting it at $105.00, indicating a belief that GMS might be acquired at higher levels. Home Depot’s interest in GMS, although details remain undisclosed, suggests a potential bidding war, with Truist suggesting that these offers may lead to GMS no longer being publicly traded.

GMS’s recent fiscal fourth-quarter results exceeded expectations, which DA Davidson noted as a factor in raising their price target to $83.00. DA Davidson highlighted the company’s progress in cost-cutting and provided a positive outlook for the first quarter of fiscal 2026. Meanwhile, Raymond (NSE:RYMD) James increased its price target to $90.00, maintaining an Outperform rating, citing GMS’s strong fundamentals despite challenges in the housing market. These developments have positioned GMS as a significant focus for investors and analysts alike.

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