Buy Rating Reiterated on Temporary Weakness, Solid Fundamentals, and Margin Expansion Potential

William Blair analyst Ryan Merkel has maintained their bullish stance on AYI stock, giving a Buy rating on January 5.

Ryan Merkel has given his Buy rating due to a combination of factors that point to near-term weakness but solid underlying fundamentals. He views the current share price decline as excessive, particularly since the quarter was largely in line with expectations and full-year guidance was reaffirmed. While he anticipates softer second-quarter sales and margins due to seasonality and the fading impact of elevated backlog, he notes that these dynamics are temporary and already well understood. He also highlights that execution has been strong despite a sluggish lighting market, with the company posting better-than-expected EPS driven by operating expense discipline and tax benefits.
Merkel emphasizes that margin drivers support a more constructive outlook for the second half of the year. He expects productivity initiatives and a favorable mix from the AIS segment to offset tariff-related headwinds, with AIS margins able to sustain near the current strong levels, even if somewhat volatile. He also sees meaningful long-term opportunity from cross-selling between the ABL and AIS businesses, which could open new growth avenues beyond the current macro softness. Taken together—share price weakness, stable guidance, ongoing share gains, and credible margin expansion levers—Merkel concludes that the stock is attractive on a pullback and reiterates a Buy recommendation.

Merkel covers the Industrials sector, focusing on stocks such as Aaon, QXO Inc, and Fastenal Company. According to TipRanks, Merkel has an average return of 4.7% and a 53.57% success rate on recommended stocks.

In another report released on January 5, Morgan Stanley also maintained a Buy rating on the stock with a $425.00 price target.