On Monday, Barclays (LON:BARC) made a significant adjustment to its stance on Edenred (EPA:EDEN:FP) (OTC: EDNMY), downgrading the stock from Overweight to Equalweight and slashing the price target to €36.00 from the previous €61.00. The revision comes as Barclays analysts reassess the potential growth and regulatory landscape for the company.
In a detailed statement, Barclays highlighted four key areas that could influence Edenred's stock performance: regulatory changes in major markets outside of Italy, the impact of recent acquisitions on growth, the macroeconomic environment in Europe, and management's ability to mitigate costs, particularly in Italy. However, the firm expressed skepticism about positive developments in these areas over the next year.
Barclays analysts noted that while regulatory risks appear to be lower in the short term, especially after the situation in Italy, there's a need for better visibility on potential changes in other crucial markets such as France and Brazil. The analysts also pointed out the importance of evidence that Edenred's recent acquisitions, including Reward Gateway and Spirii, are contributing to faster growth in the 'Beyond Solutions' segment.
The macroeconomic climate also plays a role, with Barclays looking for signs of political stability in key European markets like France and Germany, along with less foreign exchange volatility. Furthermore, the analysts are looking for Edenred's management to provide positive surprises regarding cost mitigation opportunities in Italy.
Despite these factors, Barclays remains cautious, stating they do not expect to see evidence of these positive developments in the next 12 months. The firm's 2025 EBITDA estimate is 2% below the consensus, leading them to suggest that Edenred may continue to be a 'value trap' as prospects for robust margin growth are overshadowed by uncertainties in near-term growth and earnings per share.
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