Bullish indicating open at $55-$60, IPO prices at $37
On Tuesday, Citi analyst Scott Gruber adjusted the price target for Atlas (NYSE:ATCO) Energy Solutions Inc (NYSE:AESI), increasing it to $24.00 from the previous $22.00, while maintaining a Neutral stock rating. The revision followed Monday's announcement that Atlas Energy Solutions , currently trading near its 52-week high of $25.38, acquired a distributed power business in a $220 million transaction. According to InvestingPro data, the company has demonstrated impressive momentum with a 47.95% return over the past year.
Gruber's assessment of the acquisition suggests it is a strategic move aimed at capitalizing on the growth potential within the power sector and diversifying the company's revenue sources. The timing appears favorable, as InvestingPro data shows Atlas Energy's robust revenue growth of 48.67% in the last twelve months. Specifically, the acquisition is expected to strengthen Atlas Energy's presence in the less cyclical production vertical. While the assets acquired may not be the ideal solution for a data center, Atlas Energy, with its current market capitalization of $2.72 billion, seems to have carved out a valuable niche for small-scale generators used in production and other applications.
The analyst anticipates that the impact on Atlas Energy's stock will be modest, as the company's shares are currently trading at a multiple that is consistent with the historical trading multiples of comparable quality production-oriented businesses. For example, companies like CHX have traded at similar multiples in the past.
Gruber also notes that the recent deal, coupled with the anticipated free cash flow from the Dune Express initiative, supports the justification for Atlas Energy's existing trading multiple. However, he does not foresee this leading to a significant re-rating of the company's stock in the near term. The acquisition is seen as a step that aligns with Atlas Energy's current valuation rather than one that will dramatically change market perceptions.
In other recent news, Atlas Energy Solutions has been the focus of several significant developments. Stephens analyst Michael Scialla raised the company's price target to $29, maintaining an Overweight rating. This adjustment came in response to Atlas Energy's recent acquisition of Moser Acquisitions, Inc. for $220 million, a move projected to diversify Atlas Energy's portfolio and enhance its offerings in the power solutions sector. This acquisition is expected to close by the end of the first quarter of 2025.
Additionally, Atlas Energy reported a 6% quarterly increase in revenue, reaching $304 million, and announced a dividend increase to $0.24 per share and a $200 million share repurchase program, indicating confidence in its financial health. However, despite these positive developments, Atlas Energy has received a series of downgrades from major firms including BofA Securities, Goldman Sachs, and Citi, shifting the stock rating from Buy to Neutral due to concerns over the company's financial forecasts.
These recent developments provide insight into Atlas Energy's strategic moves and financial performance. While the company maintains strong fundamentals, with revenue reaching $925.76M and year-over-year growth of 48.67%, investors and analysts continue to closely monitor its progress.
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