On Monday, Jefferies adjusted its financial outlook on Fortrea (NASDAQ:FTRE) shares, a company traded on the NASDAQ stock exchange. The firm reduced its price target for Fortrea to $36.50, a decrease from the previous target of $44.00. Despite the lowered target, Jefferies continues to recommend a Buy rating for the stock.
The revision follows Fortrea's report of a challenging first quarter, which included revenue declines, low profit margins, and a downward revision of future guidance. The company's spending has decreased more than anticipated, given the increase in its oncology and biotech segments.
The new projections set by Fortrea indicate a significant increase in revenue and margins, which the analyst describes as somewhat ambitious, especially if business-to-business (B2B) transactions increase by 1.2 times.
Even with a conservative outlook that falls below the company's own guidance, Jefferies has applied a modest valuation multiple to Fortrea's anticipated 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA).
This valuation, which includes a 28% discount compared to Fortrea's peers, supports the new price target of $36.50. The firm's stance remains positive on the stock with the continuation of a Buy rating.
The price target adjustment reflects Jefferies' analysis of Fortrea's financial performance and future expectations. The firm has taken into account the slower burn rate and the potential for growth in the company's key business areas to arrive at the new price target. Despite the setbacks observed in the first quarter, Jefferies appears to see long-term value in Fortrea's stock at the adjusted price level.
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