On Tuesday, Berenberg maintained its Buy rating and €26.00 price target on Elis SA (ELIS:FP) (OTC: ELSSF), despite the stock experiencing a significant drop recently. The decline of 17% followed the company's potential acquisition news of its American counterpart, Vestis, which was first reported on September 5. Berenberg's stance reflects confidence in the company's commitment to financial prudence, particularly concerning leverage limits and the potential earnings boost from any deal.
Elis SA's management has emphasized their dedication to maintaining financial discipline, which Berenberg finds reassuring. This approach is expected to support the company's valuation regardless of whether the acquisition occurs. Berenberg suggests that the current undervaluation of Elis SA shares presents an opportunity for growth once there is more clarity for investors.
The firm also speculates that the market is more likely to see a "no-deal" outcome, which could lead to a relief rally in Elis SA's share price. However, if the acquisition were to go through on favorable terms, it could also warrant a higher valuation for the shares. Berenberg cautions that such a development might result in a shift among shareholders and potentially bring about increased short-term volatility in the stock's price.
In summary, Berenberg's analysis indicates that Elis SA's stock has been excessively penalized by the market following the acquisition news. The firm's reiterated Buy rating and price target reflect a belief in the stock's potential for recovery and growth once the uncertainty surrounding the Vestis deal is resolved.
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