On Friday, Exane BNP Paribas (OTC:BNPQY) adjusted its stance on ISS A/S (ISS:DC) (OTC: ISFFF), downgrading the stock from Outperform to Neutral and reducing the price target to DKK130.00 from DKK155.00. The modification was prompted by a reassessment of the company's growth dynamics.
The firm indicated that the previous optimism surrounding ISS A/S's internal momentum no longer seems justified. This shift in perspective comes as the company continues to report negative net new volumes and overall volumes that fail to impress. ISS A/S's growth has been predominantly driven by price, a trend that may not be sustainable, especially with the anticipation of easing inflation.
According to the firm, while ISS A/S's shares may appear undervalued, the lack of momentum in securing new contracts is a concern. This has led to the decision to downgrade the facilities services company to a Neutral rating.
The firm's analysis suggests that ISS A/S's performance is not meeting expectations regarding volume growth. This is a critical factor for the company's prospects, as relying on price-driven growth alone is not a reliable long-term strategy.
The revised price target of DKK130.00 reflects the firm's adjusted expectations for ISS A/S's stock performance. The decrease from the previous target of DKK155.00 is indicative of the less favorable outlook on the company's ability to generate organic growth through new business wins.
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