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On Tuesday, Berenberg, a leading financial services firm, initiated coverage on Puma SE (PUM:GR) (OTC: PMMAF (OTC:PMMAF)) with a favorable Buy rating and set a price target of €40.00. This announcement comes as Puma’s valuation reaches what Berenberg describes as an "eye-catching" low point, with the stock down over 48% in the past year and currently showing oversold conditions according to InvestingPro technical indicators.
According to the firm’s analysis, Puma’s current enterprise value to sales ratio of 0.36x is the lowest observed in the company or its peers in two decades, following a series of profit warnings. Berenberg points out that this valuation implies that the market expects Puma to maintain EBIT margins of only 2-3% indefinitely, a level that the company has dipped to just twice in the past 30 years. InvestingPro data shows the stock trading at attractive multiples with a P/E ratio of 10.7x and EV/EBITDA of 5.8x, suggesting potential undervaluation relative to historical levels.
Berenberg’s coverage highlights Puma’s strengths, including its positioning in key performance sports, its extensive archive, robust wholesale relationships, and the potential positive impact of new management. Despite the brand’s current lack of momentum, the analyst believes the market undervalues these assets.
The firm also emphasizes Puma’s strong balance sheet, which it views as providing downside protection for investors. Berenberg’s stance is that Puma’s stock offers significant growth potential, with the price target suggesting an upside of more than 100% from its current level.
The initiation of coverage by Berenberg reflects a positive outlook on Puma’s future, despite recent challenges. The firm’s Buy rating and ambitious price target indicate confidence in the company’s ability to rebound and capitalize on its underlying strengths.
In other recent news, Puma SE has faced a series of analyst downgrades and revised financial expectations. UBS analyst Robert Krankowski downgraded Puma SE from Neutral to Sell, slashing the price target to €19.50, citing structural challenges and a need for strategic adjustments. BNP Paribas (OTC:BNPQY) Exane also downgraded Puma SE from Outperform to Neutral, with a new price target of EUR 25.00, following a profit warning and concerns over declining profits. Meanwhile, Citi analyst Monique Pollard reduced the price target for Puma SE to €32.00, maintaining a Neutral rating, due to revised sales and margin forecasts for the upcoming fiscal years.
UBS previously maintained a Neutral rating with a price target of EUR43.90, highlighting challenges such as increased costs and a shift towards a direct-to-consumer sales strategy. Citi’s analysis pointed to lowered sales growth expectations and reduced gross margin forecasts due to currency impacts and promotional pressures. The analyst also adjusted the expected EBIT margins for fiscal years 2025 and 2026, reflecting reduced operational leverage. These recent developments indicate that Puma SE is navigating a challenging financial environment, with analysts expressing cautious outlooks on the company’s ability to meet its financial targets.
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