On Thursday, Wells Fargo (NYSE:WFC) updated its outlook on International Paper (NYSE:IP), increasing the price target to $41 from the previous target of $37, while maintaining an Equal Weight rating on the stock. The revision reflects the market's assessment of the company's potential following interest from Suzano, a firm currently listed on the B3 S.A. in Brazil.
The analyst at Wells Fargo noted that Suzano's interest in International Paper is likely driven by two main factors. Firstly, Suzano aims to diversify its operations from pulp to cardboard (cboard) production. Secondly, the company is considering moving its primary listing to the New York Stock Exchange (NYSE). This strategic shift could potentially enhance Suzano's market visibility and investor base.
Suzano is recognized for leading its industry peers with a robust EBITDA margin of 47%. Despite this strong performance, the firm trades at a discount compared to peer multiples. The analyst suggests that this discount may be attributed to Suzano's current listing on Brazil's B3 S.A. exchange.
The potential relocation of Suzano's primary listing to the NYSE is seen as an opportunity for the company to achieve a re-rating of its market multiples. The Wells Fargo analyst believes that a successful migration could result in Suzano being valued more in line with its industry counterparts.
InvestingPro Insights
As International Paper (NYSE:IP) garners attention with Wells Fargo's updated price target, real-time data and insights from InvestingPro provide additional context for investors. The company's market capitalization stands at $15.42 billion, with an adjusted P/E ratio over the last twelve months as of Q1 2024 at 26.45, suggesting a high valuation compared to historical standards. Despite recent revenue declines, with a -11.6% change over the last twelve months as of Q1 2024, International Paper has demonstrated resilience with a notable dividend yield of 4.17%, maintaining dividend payments for over five decades.
InvestingPro Tips indicate that while net income is expected to grow this year, analysts have tempered their optimism with three earnings downgrades for the upcoming period. Additionally, the stock's recent performance has been strong, with a 28.49% return over the last month, contributing to a 55.11% return over the past year. This robust short-term performance aligns with the stock trading near its 52-week high, at 96.31% of the peak.
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