Piper Sandler remains cautious on TPI Composites shares amid weak earnings

On Monday, Piper Sandler adjusted its price target for TPI Composites (NASDAQ:TPIC) shares, a manufacturer of composite wind blades, increasing it to $3.70 from the previous $3.50. The firm has decided to maintain a Neutral rating on the stock despite recent underperformance in the company's second-quarter earnings.

The adjustment comes after TPI Composites reported earnings that fell short of expectations, primarily due to an unexpected cancellation of facility orders by Nordex during the quarter.

The plant in question, which was not profitable for TPI Composites, was already scheduled to be transferred to Nordex at the end of the second quarter of 2024.

As a result of the weaker than anticipated earnings, TPI Composites has revised its EBITDA margin guidance for the year downward to 1%, which equates to approximately $13.5 million. This figure contrasts with the previous estimates from Piper Sandler and the Street, which were $18 million and $13 million, respectively.

Looking forward, the management of TPI Composites has noted that the recovery in the U.S. market is likely to be delayed. However, the company has confirmed that its U.S. production volumes are fully booked. Additionally, TPI Composites has reiterated its target to reach a $100 million EBITDA run rate by the fourth quarter of 2024.

Despite the updated expectations for higher EBITDA in 2026, Piper Sandler's stance remains cautious. The firm cites the limited potential for an increase in the stock's value at this point in time as the reason for maintaining the Neutral rating, even as the price target has been slightly raised.

InvestingPro Insights

As investors consider the revised outlook for TPI Composites (NASDAQ:TPIC), it's important to review the company's financial health and market performance. According to InvestingPro data, TPI Composites operates with a notable market capitalization of $186.08 million. However, the company's financials reflect challenges, with a negative P/E ratio of -0.91, indicating that it is not currently generating profits relative to its share price. The last twelve months as of Q2 2024 also show a significant revenue decline of approximately 16.94%, underscoring the earnings difficulties mentioned in the recent report.

InvestingPro Tips suggest that TPI Composites is grappling with a significant debt burden and may face difficulties making interest payments, as evidenced by its negative gross profit margin of -3.66% over the last twelve months. Additionally, analysts do not expect the company to be profitable this year, which aligns with the cautious stance from Piper Sandler despite the company's targets for EBITDA growth by the end of 2024.

Investors should note that with the company's stock price movements being quite volatile, there is an inherent risk associated with investing in TPI Composites at this time. For a deeper analysis and more InvestingPro Tips, which currently total over ten for TPIC, visit https://www.investing.com/pro/TPIC.

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