On Monday, HSBC (LON:HSBA) revised its stock price target for Mobico Group PLC (MCG:LN), a UK-based transportation company, to £1.00 from the previous £1.20. Despite the reduction, the firm continues to recommend a Buy rating for the company's shares.
The adjustment comes as the analyst acknowledged potential further profit downgrades for Mobico Group, which they believe would be limited in scope. They noted that if volume recovery and pricing trends stay robust, Mobico could approach the previously estimated forecasts for 2024.
The analyst expressed optimism about the cost reduction programs already implemented by Mobico Group. These efforts, combined with the company's financial performance, suggest that the stock may be undervalued.
Even after accounting for a £20 million increase in hybrid expenses expected in 2026, the analyst finds the shares to be attractively priced at 4 times the projected 2026 earnings per share and 8 times the enterprise value to earnings before interest and taxes (EV/EBIT).
HSBC also identified several potential catalysts that could aid Mobico Group in improving its financial standing. These include the possible sale of its school bus operations, renegotiations of bus subsidies in the UK, and potential subsidy discussions in Germany. These factors contribute to the analyst's perspective that there are opportunities for Mobico Group to make a positive turnaround.
The revised stock price target of £1.00 reflects HSBC's updated estimates for Mobico Group's financial projections. The firm maintains its Buy rating, indicating their belief that the stock holds potential for investors despite the lowered price target.
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