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Investing.com - UBS downgraded Stora Enso OYJ (STERV:FH) from Buy to Neutral on Thursday, while slightly lowering its price target to EUR10.70 from EUR10.80. According to InvestingPro data, three analysts have recently revised their earnings expectations downward, though the company’s net income is expected to grow this year.
The downgrade comes despite Stora Enso shares having risen more than 30% from their April lows, when the company completed the sale of 12% of its Swedish forest assets and announced a review of potentially spinning out its forest business. The stock has maintained a 17.49% year-to-date return, with a market capitalization of $9.45 billion.
UBS noted that market conditions have deteriorated during Stora’s stock recovery, with Chinese hardwood pulp prices falling approximately 17%, containerboard momentum reversing, and folding boxboard (FBB) prices stagnating.
While UBS believes pulp prices have bottomed out with potential for medium-term recovery, it views UPM as a better investment for exposure to the pulp cycle, assigning UPM a Buy rating with a price target of EUR28 per share.
The investment bank acknowledged that a forest spin-off could create short-term upside for Stora Enso and earnings should recover eventually, but concluded these positive factors are already reflected in the current share price.
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