On Wednesday, Stifel adjusted its stance on Tecnoglass (NASDAQ:NYSE:TGLS), downgrading the stock from Buy to Hold and lowering the price target to $45 from $48. The revision comes as the firm anticipates the company's fourth-quarter 2023 earnings, which are expected in early March. Stifel noted several short-term challenges for Tecnoglass, despite maintaining a positive long-term outlook on the company.
The downgrade is partly attributed to indications from channel checks that Tecnoglass experienced a significant decline in volumes, exceeding 10% in the fourth quarter of 2023, potentially reducing revenues by more than $10 million and impacting adjusted EBITDA by over $5 million. Additionally, the Colombian peso's appreciation against the U.S. dollar by 15% in the same quarter compared to the previous year is likely to present an approximate $5 million challenge to adjusted EBITDA.
Stifel also pointed out concerns over an expected correction in the multi-family sector, which accounts for roughly 55% of Tecnoglass's revenue. However, the firm acknowledged that Tecnoglass's primary market in Southern Florida is expected to fare better than most. The company's substantial backlog is seen as a possible mitigating factor that could help bridge the period until a recovery, which Stifel forecasts for 2025.
The firm expressed willingness to reevaluate its rating after the near-term obstacles subside, considering various positive catalysts that could emerge following the current period of adjustment for Tecnoglass.
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