On Friday, Stifel reiterated its Buy rating and a $52.00 stock price target for Azek Co. (NYSE: AZEK), despite the shares of Azek and its industry peer TREX falling by 8% and 7% respectively. According to the firm, the current market movement is seen as an overreaction, and they recommend purchasing shares during this period of weakness.
The firm's confidence is backed by recent interactions with TREX, including a site visit in May and a conference in June, which did not indicate any significant shifts in business trends. Sell-through and channel inventory levels for these companies are reported to be reasonable and align with expectations.
Further supporting Stifel's position is preliminary survey data collected yesterday, with over 75 respondents indicating that demand trends experienced so far this year have remained steady. This suggests that the current market sell-off does not reflect the actual performance and outlook for these companies.
Stifel views the sell-off as a mismatch with the ongoing demand and believes that both Azek and TREX represent high-quality investments with a compelling growth narrative. The firm's stance remains firm despite the day's market fluctuations, suggesting a potential opportunity for investors to engage with these stocks at a lower entry point.
In other recent news, The AZEK Company Inc. has authorized an additional $600 million for its stock repurchase program, supplementing the approximately $75 million remaining from a previous authorization.
The company has also adjusted its full-year guidance to range between $364-$380 million, indicating confidence in its growth trajectory. Analysts from RBC (TSX:RY) Capital Markets and Barclays (LON:BARC) Capital Inc. have maintained positive ratings for AZEK, reflecting a consensus of the company's strong market position.
Still, AZEK has recently been dealing with an accounting misstatement that required restatements and delayed Q2 results. Despite this, the issue is viewed as resolved and isolated, with core demand and margin trends remaining favorable. The company also received a non-compliance notice from the New York Stock Exchange due to a delay in filing its quarterly financial report. AZEK has a six-month period to file the overdue report and regain compliance.
For the second quarter of fiscal year 2024, AZEK reported an 11% increase in consolidated net sales to $418 million. The company raised its full-year net sales and adjusted EBITDA projections on the back of solid residential segment growth and successful cost-saving initiatives. These recent developments highlight AZEK's resilience and adaptability in the face of challenges, and its commitment to delivering value to its investors.
InvestingPro Insights
As Stifel maintains a bullish stance on Azek Co. (NYSE: AZEK), real-time data from InvestingPro aligns with some of the optimism surrounding the company. With a market capitalization of $6.27 billion, Azek is trading at a P/E ratio of 42.58, reflecting a high earnings multiple, which is often indicative of investor expectations for future growth.
This is supported by the fact that Azek's net income is expected to grow this year, an InvestingPro Tip that could be a driving factor behind Stifel's Buy rating. Moreover, Azek's revenue growth over the last twelve months stands at a solid 10.95%, showcasing a positive trajectory in financial performance.
Investors should note that Azek's stock price movements have been quite volatile, as reflected in the 69.25% return over the last year, which includes a 22.17% year-to-date price total return. This volatility, however, may present an opportunity for those looking to invest during market dips as recommended by Stifel. Furthermore, Azek's liquid assets exceed its short-term obligations, indicating a sound liquidity position for the company.
For those seeking more in-depth analysis, InvestingPro offers additional tips on Azek, which can be accessed at https://www.investing.com/pro/AZEK. There are 12 more InvestingPro Tips available, providing a comprehensive look at Azek's financial health and market potential. Readers interested in leveraging these insights can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enriching their investment strategy with expert data and analysis.
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