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On Wednesday, Kepler Cheuvreux revised its stance on Argan (NYSE:AGX) SA (ARG:FP), downgrading the stock from Buy to Hold and adjusting the price target from EUR 75.00 down to EUR 67.00. The change in rating comes as Kepler Cheuvreux analysts reconsider the future prospects of the company, particularly beyond the near term.
Analysts at Kepler Cheuvreux have expressed concerns over the company’s long-term leverage targets. Argan SA’s guidance focuses on achieving a loan-to-value (LTV) ratio of 30% by 2030, a goal that Kepler Cheuvreux views as overly ambitious. This target appears to be aimed at providing reassurance to bondholders ahead of a significant EUR 500 million bond refinancing due in November 2026, which carries a coupon of 1%.
The firm’s current net initial yield, standing at 4.9%, is considered by Kepler Cheuvreux to be "priced for perfection" when compared to the prime yield currently observed in France. This assessment suggests that the stock’s pricing fully reflects its optimal earnings potential, leaving little room for growth.
Kepler Cheuvreux’s updated financial model, which includes the latest acquisitions and disposals announced by Argan SA, indicates limited potential for earnings growth. As a result, analysts believe that the stock’s current multiples are justified. The downgrade to Hold reflects a view that there are more attractive investment opportunities available in the market.
In their commentary, Kepler Cheuvreux analysts stated, "While we were keen to own ARGAN based on its good return prospects (EPS up 6% on our estimate still in 2025), we probably overlooked the following years, especially as ARGAN preferred to guide on LTV reaching 30% by 2030 instead of EPS growth." They added that the revised price target and stock rating more accurately reflect the firm’s expectation for Argan SA’s financial performance and market position.
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