On Tuesday, Jefferies made a significant adjustment to its stance on Lyra Therapeutics (NASDAQ:LYRA), downgrading the stock from Buy to Hold. The firm also drastically reduced the price target for Lyra Therapeutics shares, setting it at $0.50, a steep decline from the previous target of $10.00.
The downgrade comes amidst a broader analysis of industry prospects, as Jefferies also initiated coverage of UL Solutions (ULS) with an Overweight rating and a December 2024 price target of $39. UL Solutions, a leading global testing, inspection, and certification (TIC) provider, operates within a market valued at $38 billion in 2022. This market is expected to experience a compound annual growth rate (CAGR) of 5-6% from 2022 to 2026.
UL Solutions, recognized as the largest TIC player in North America and the only publicly traded TIC company in the U.S., has demonstrated consistent growth since 2011. The company's organic revenues have increased by approximately 5% annually, with acquisitions contributing an additional 1-2% to annual revenue growth. Projections indicate that UL Solutions will maintain this growth trajectory between 5-6% from 2024 to 2026.
An important factor in the TIC market's growth is the ongoing electrification of products, particularly electric vehicles. UL Solutions is well-positioned to capitalize on this trend due to its significant role in the sector. The company also boasts the highest margin among its publicly traded competitors, attributed to its diverse product portfolio.
According to Jefferies, UL Solutions' performance merits a premium valuation compared to its peers. The firm's rationale is based on the expectation that TIC companies will grow at similar rates over time, and UL Solutions will sustain its higher margin profile.
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