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On Wednesday, Jefferies analysts revised their stance on Veolia Environnement SA (VIE:FP) (OTC: OTC:VEOEY), downgrading the stock from Hold to Underperform and lowering the price target to €25.00 from the previous €31.00. The downgrade comes as the stock trades at a P/E ratio of 18.47x and appears slightly overvalued according to InvestingPro’s Fair Value model, despite showing strong YTD returns of 24%. The downgrade is attributed to concerns over the company’s earnings prospects amid a challenging macroeconomic environment.
The analysts at Jefferies highlighted the potential downside risk-reward skew on Veolia’s earnings, pointing to the volatile macro backdrop as a significant factor. They noted that approximately 20% of Veolia’s revenues are directly exposed to macroeconomic fluctuations, with regression analysis indicating a clear connection between the company’s revenues and the economic cycle. This exposure is significant given Veolia’s substantial annual revenue of $46.3 billion and EBITDA of $5.77 billion in the last twelve months.
The research report expressed caution regarding Veolia’s booster growth, suggesting that the possibility of lower economic growth and a deteriorating macroeconomic situation makes it difficult to have confidence in growth projections that lack a proven track record. Jefferies conducted a scenario analysis that factored in lower industrial production and booster growth, leading them to position their EBITDA and net income estimates for fiscal years 2025 to 2027 at 3% and 11% below the consensus, respectively.
The revised price target of €25.00 reflects these concerns and represents a significant reduction from the previous target of €31.00. This adjustment indicates the analysts’ view that Veolia’s stock may face downward pressure in the near term.
Veolia Environnement SA is a French transnational company with operations primarily in water management, waste management, and energy services. The company’s performance is closely tied to industrial production and economic activity, making it sensitive to macroeconomic changes.
The downgrade by Jefferies suggests that investors should exercise caution with Veolia’s stock, considering the potential challenges the company may face in the current economic climate.
In other recent news, Veolia Environnement SA has been the focus of several analyst updates. BofA Securities downgraded Veolia’s stock rating from Buy to Neutral, citing concerns over the political climate’s impact on the economic environment. The firm also reduced its price target from EUR37 to EUR30, reflecting potential downside risks to the company’s organic growth and aligning with consensus estimates. Similarly, Citi downgraded Veolia from Neutral to Sell, with a new price target of EUR26.40, down from EUR28.30. This adjustment is attributed to fears of a global recession and its effect on industrial activity, which could significantly impact Veolia’s earnings.
In contrast, Bernstein initiated coverage on Veolia with an Outperform rating and set a price target of EUR38. The analysis highlights Veolia’s current valuation discount and favorable earnings and dividend growth prospects. Bernstein’s projections suggest a forward P/E of 11.1x for 2027 and a dividend yield of 6.0%, supported by global megatrends. The firm’s price target is based on a Discounted Cash Flow analysis, considering factors like GDP growth and inflation adjustments. These recent developments offer varied perspectives on Veolia’s potential performance amid economic challenges.
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