Sika AG, the Basic Materials sector company, was revisited by a Wall Street analyst today. Analyst Cedar Ekblom from Morgan Stanley downgraded the rating on the stock to a Hold and gave it a CHF193.00 price target.
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Cedar Ekblom has given his Hold rating due to a combination of factors impacting Sika AG’s growth outlook. The company’s decision to focus on margin protection and restructuring efforts in China, its second-largest market, has led to a more cautious revenue growth forecast. Additionally, the slowing or stagnant trends in key regions such as the USA, Germany, France, and Switzerland, which collectively contribute to about half of the company’s revenues, further dampen growth prospects.
Ekblom also notes that Sika’s growth no longer significantly outpaces the broader construction market, diminishing its status as a premium growth stock. This has resulted in a reduction of earnings estimates and a lower valuation multiple, aligning more closely with industry peers. Consequently, the price target for Sika AG has been adjusted downward by 22%, reflecting these revised expectations.