International Paper (IP) Could See Upside on Pricing Power, Flat Capacity

International Paper (NYSE: IP) shares are seeing some pressure Monday following a downgrade by Citi earlier, which lowered the stock's rating from Buy to Neutral. However, there was some other positive commentary on the name issued last weekend.

Barron's believes that now might be the time to buy International Paper. The piece noted an increase in online sales, notably from Amazon.com (Nasdaq: AMZN), and how International Paper is the supplier for around 50 percent of the cardboard boxes used by the e-commerce giant.

Online shopping now amounts to 4 - 5 percent of International Paper's total sales and is becoming a bigger part of the company's revenue growth outlook with sales rising 20 percent per year.

Shares of International Paper haven't reflected its steady growth over the last decade, slumping 30 percent over the last year. The company generates around $1.5 billion of free cash flow annoually and recently boosted its dividend to investors. The company has also repurchased 1.9 billion shares since 2013, which could boost EPS by 3 percent by itself.

Slowdown concerns in China, the stronger U.S. dollar, and avian flu worries have all contributed to analysts and investors reassessing International Paper's potential for 2016. Bulls on the stock see International Paper able to maintain current pricing and margins. No additional capacity is expected to come online this year in the paper segment.

M&A could also be in the picture for International Paper as it continues to rightsize, which includes shuttering or selling non-key assets and adjusting certain joint ventures and partnerships.

Price targets on International Paper range from $43 to around $55, both suggesting upside for the name this year.

Shares of International Paper are down 10 percent.

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