UPDATE: Diebold (DBD) Raised to 'Overweight' at JPMorgan on Valuation; Pull-Back Tied to 'Forced Selling', Says Analsyt
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(Updated - September 26, 2016 9:56 AM EDT)
JPMorgan upgraded Diebold (NYSE: DBD) from Neutral to Overweight with a price target of $33, implying upside of 34%. Analyst Paul Coster sees compelling valuation, and he said a pullback in shares could be related to "forced selling."
"A 13% decline in DBD stock over the last month (S&P500 down 1%) may have been triggered by the pending cut to the dividend and sale of US-listed DBD shares by European investors, yielding an opportunity to buy this stock at an attractive multiple that offsets the near-term tail-risks associated with acquisition of Wincor Nixdorf. By the February 2017 analyst day, noise associated with the acquisition should dissipate and investors should gain a clearer line of sight to the $160 million synergy target, debt deleveraging potential, and earnings power. Inbound call activity has been elevated, suggesting to us that long-inclined investors are looking for an entry-point here," said Coster.
Commenting further on the recent pull-back in shares, the analyst said, "DBD, down ~13% in the last month, has under-performed the market (down 1%) and near-peer NCR (down ~6%), spurring inbound queries from clients. We believe much of the underperformance can be attributed to forced-selling by some dividend investors (ahead of the signaled 2/3rds reduction to the dividend) and by European investors that received US-listed DBD shares on August 16th. To the extent we are correct, and that forced selling abates, we believe the stock is poised to recover."
Shares of Diebold closed at $24.49 yesterday.
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