Seaport Global Securities Upgrades Constellium (CSTM) to Buy
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Seaport Global Securities upgraded Constellium (NYSE: CSTM) from Neutral to Buy and maintains an $8 price target.
Analyst Josh Sullivan commented, "We are upgrading CSTM to Buy from Neutral and maintain our $8 price target. Our prior Neutral rating at the time of our initiation was largely predicated on CSTM's ~40% stock appreciation following the Zhongwang/Aleris deal, which we felt was overdone. With CSTM stock pulling off those highs, Q3:16 results confirming the Wise Metal turnaround, aerospace expectations set to flat, and most importantly, CSTM's new management team extolling the virtues of capital investment discretion, we believe CSTM is again at attractive levels. The upper bounds of expectations for automotive BiW and FCF generation point to a +$10 stock, but CSTM is setting up to cross those thresholds in 2019. However, near term, the current operations, even at depressed valuations that are warranted given leverage, point to an $8 stock. Given the new presidential administration, we see additional hurdles to the Zhongwang/Aleris tie up. CSTM's own administration change with CEO Jean-Marc now at the helm marks a new path for the company – one not rooted in the high flying days of the IPO, but one of stability and metric capex. Therefore, the long-term targets that could get CSTM stock back to double digits remain; however, just blocking and tackling near term, in our opinion, offers an attractive opportunity."
Shares of Constellium closed at $6.05 yesterday.
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