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On Tuesday, Barclays (LON:BARC) upgraded Holcim Ltd (OTC:HCMLY) (HOLN:SW) stock rating from Underweight to Overweight, marking a significant adjustment in their outlook on the company. Accompanying this upgrade, the firm also raised its price target for Holcim (SIX:HOLN) from CHF84.00 to CHF109.00, indicating a more optimistic view of the stock’s potential performance.
The positive shift in rating comes after a period of underperformance by Holcim compared to its peers in the European heavyside sector. Since November of the previous year, Holcim’s stock has lagged behind its counterparts by a margin of 19-67%. This underperformance has been attributed in part to market apprehension surrounding the company’s upcoming spin-off.
Barclays analysts pointed out that the relative derating of Holcim appeared overdone, suggesting that the market had unduly penalized the stock. The firm noted that several concerns that had previously clouded the spin-off event have now been mitigated. With limited initial index selling pressure and known dissynergy costs, the risks surrounding the spin-off have decreased.
The spin-off, scheduled for June 23, 2023, is seen as a potential catalyst for the stock. Barclays views this event as a "clearing event" that could reveal the intrinsic value of Holcim’s constituent parts. The firm’s analysis suggests that the market has not fully appreciated the underlying investment case for Holcim, and the upcoming spin-off could change that perception.
The upgrade and increased price target reflect Barclays’ revised expectations for Holcim’s future financial performance and stock valuation. The firm’s commentary underscores a belief that the spin-off could be a transformative moment for Holcim, offering an opportunity for investors to reassess the company’s value proposition.
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