On Tuesday, Barclays (LON:BARC) adjusted its stance on Gestamp (GEST:SM) (OTC: GMPUF), downgrading the stock from Overweight to Equalweight and setting a new price target of €3.00, decreased from the previous €3.50. The revision reflects concerns over the company's operations in North America and potential tariff impacts.
The firm's analyst cited Gestamp's disappointing progress with its North American turnaround and Phoenix plan program, despite a reasonably favorable Light Vehicle Production (LVP) environment in the region. The analyst noted that Gestamp's commitment to improving free cash flow and the balance sheet remains strong, but the lack of headway in North America is a significant setback.
Adding to the uncertainty, the threat of increasing tariffs between the US and Mexico could disrupt Gestamp's plans to shut down Edscha production capacities in the US and transfer them to Mexico. Such disruptions could jeopardize the initial strategy and add to the risks surrounding the company's equity story.
The analyst also pointed out concerns related to Gestamp's ongoing investments in electric vehicle (EV) production amid a softening in battery electric vehicle (BEV) momentum. The combination of these factors led to the conclusion that 2024 might not represent the final transition year for Gestamp as previously anticipated.
The new price target of €3.00 reflects updated earnings and cash flow estimates, as well as a higher valuation risk premium due to the increased levels of uncertainty impacting Gestamp's business outlook.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.