On Thursday, Barclays (LON:BARC) increased the price target for Azek Co. (NYSE: AZEK) to $58 from the previous $50 while maintaining an Overweight rating on the stock. The adjustment reflects a higher valuation multiple based on stronger confidence in the long-term growth of the decking market. This optimism is supported by the market's recent resilience, particularly in the renovation and remodeling (R&R) sectors.
The new price target is set at 25.5 times the CY™24E EBITDA estimate, up from 21.7 times, as per Barclays' analysis. The EBITDA estimate for the calendar year 2024 is projected to be $344 million. The revised valuation also takes into account the year-end 2024 net debt, which is anticipated to be $211 million, and excludes $24 million of CY™24 stock compensation.
Barclays' decision to raise the price target reflects a positive outlook on Azek's market position and its ability to capitalize on growth opportunities. The firm's analysis indicates that Azek is well-placed within the decking industry, which has shown strong performance and is expected to continue its growth trajectory.
The Overweight rating suggests that Barclays expects the company's stock to outperform the average return of the stocks that the analyst covers over the next 12 to 18 months. The rating and price target update are based on the latest financial estimates and market trends observed by Barclays.
The updated price target and rating from Barclays provide investors with insight into the company's financial health and its potential for future growth in the market.
InvestingPro Insights
In light of Barclays' updated price target for Azek Co. (NYSE: AZEK), recent data from InvestingPro offers additional context for investors. Azek's market capitalization stands at approximately $7.29 billion, and the company is trading at a P/E ratio of 62.15, which reflects investor expectations of future earnings growth. Notably, analysts anticipate net income growth this year, aligning with Barclays' positive outlook.
InvestingPro data also shows a revenue growth of 6.28% over the last twelve months as of Q1 2024, with a more pronounced quarterly increase of 11.18% in Q1 2024. This supports the view that Azek is effectively capitalizing on market opportunities, particularly in the robust renovation and remodeling sectors. Furthermore, the company's strong return over the last three months, at 37.65%, and an impressive one-year price total return of 113.29%, underscore its robust market performance.
Investors seeking a more comprehensive analysis can find additional InvestingPro Tips for Azek, including insights on the company's valuation multiples and stock price volatility. With 16 more tips available on InvestingPro, investors can deepen their understanding of Azek's financial health and market position. For those interested in exploring these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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