Jefferies analyst Zach Ho downgraded the rating on Veolia Environnement (0NY8 – Research Report) to a Sell today, setting a price target of €25.00.
Zach Ho’s rating is based on a combination of factors that suggest potential downside risks for Veolia Environnement. The challenging macroeconomic environment is a significant concern, as it exposes approximately 20% of Veolia’s revenues to economic fluctuations. This exposure, coupled with a lack of demonstrated growth in uncertain economic conditions, leads to a cautious outlook on the company’s earnings potential. The scenario analysis conducted by Jefferies indicates that Veolia’s EBITDA and net income could fall below consensus estimates for the fiscal years 2025 to 2027.
Moreover, Zach Ho highlights the complexity of Veolia’s growth strategy, which spans multiple sectors such as water, waste, and energy, each with distinct dynamics. This complexity, along with the absence of clear catalysts, makes it difficult for investors to fully appreciate the company’s value, resulting in a valuation discount compared to its peers. Ho suggests that a strategic shift, such as simplifying the business structure or divesting non-core assets, could be necessary to unlock shareholder value. Until such changes are made, Veolia’s stock may struggle to attract investors seeking growth and stability.
In another report released on April 7, Citi also downgraded the stock to a Sell with a €26.40 price target.