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On Wednesday, BofA Securities adjusted its stance on Spectris Plc (SXS:LN) (OTC: SEPJF) stock, shifting from a Neutral to a Buy rating. The firm set a price target for Spectris at GBP32.50.
The upgrade comes after a notable decline in the company's relative stock price. Over the past month, following a profit warning issued on June 20, 2024, the stock has dropped 11% compared to the SXNP index and 30% year-to-date.
The analyst from BofA Securities suggested that the market's response to the delayed recovery in the life science and pharmaceutical sectors, which Spectris serves, may have been excessive.
With expectations of a potential rebound in the second half of the year due to the phasing of ERP implementation, and a possible recovery in the life sciences sector by 2025, the analyst sees an opportunity for investors.
Spectris is currently trading at approximately a 16% discount to the SXNP 12-month forward EV/EBITA average, which is a departure from its historical alignment with the index. BofA Securities anticipates a recovery in Spectris's Scientific division and has increased its EBITA estimates for fiscal years 2025 and 2026 by roughly 4%.
Despite the positive outlook and upgraded EBITA estimates, the price target remains at 3250p, which aligns with the sector's target multiple. The firm previously assigned a 10% premium to the target multiple but has now reverted to a multiple in line with the sector, reflecting that margin recovery is still on the horizon.
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