On Tuesday, Deutsche Bank (ETR:DBKGn) revised its price target for Morgan Advanced Materials plc (MGAM:LN) shares to GBP2.95 from GBP3.20, while maintaining a Hold rating. The adjustment follows Morgan Advanced's recent quarterly update and subsequent full-year guidance revision. The company's shares experienced a modest increase of 3.1% since the Q3 announcement, a movement partially attributed to the initiation of a £40 million share buyback program, which represents approximately 5.8% of the company's market capitalization at the time of disclosure.
The bank's analyst cited a reduction in earnings per share (EPS) estimates for fiscal years 2024 and 2025 by 14% and 11%, respectively, as a key factor for the price target adjustment. This reassessment is due to recent order deferrals from Morgan Advanced's silicon carbide customers, which typically contribute high margins. Despite these challenges, the company's management has largely reaffirmed its commitment to an extensive expansion plan, which is expected to play a crucial role in growth over the forecast period.
The analyst also expressed concern over the reduction in second-half expectations, which could potentially impact momentum entering 2025. The new price target of GBP2.95 reflects an 8% decrease from the previous target, primarily due to the lowered EPS projections for 2026.
The Hold rating suggests a cautious stance, with the firm acknowledging potential investor optimism but also recognizing risks that warrant a watchful approach for the time being.
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