Story
Deutsche Bank Upgrades SMA Solar to 'Buy' on Stronger Q2 and Raised Outlook
Summary
The German investment bank raised its price target for the solar inverter maker by over 70% to €75, citing a stronger-than-expected preliminary second-quarter performance and an improved full-year forecast.
Deutsche Bank upgraded SMA Solar Technology AG (ETR:S92G) to "Buy" from "Hold" on Monday, significantly raising its price target on the German solar inverter manufacturer to €75 from €44. The upgrade follows the company's preliminary second-quarter results and improved earnings outlook, which the bank believes support further upside for the stock.
Stronger Q2 Driven by One-Offs
Last week, SMA Solar announced preliminary second-quarter results that surpassed analyst expectations. The company's performance included:
- Revenue: €346 million, a 3% decrease from the prior-year period.
- EBITDA: €65 million, a substantial improvement from a €16 million loss a year earlier and well above the consensus estimate of €44 million.
- EBIT: €52 million, compared to a loss of €30 million in the same quarter last year and beating the €32 million consensus forecast.
According to Deutsche Bank's analysis, the reported earnings were significantly boosted by two one-time events. These include the earlier-than-expected reimbursement of U.S. tariffs and a €22 million inventory write-back after the company sold previously impaired stock on the secondary market.
Analyst's Take
AdExcluding these one-off items, Deutsche Bank estimated SMA Solar's underlying second-quarter EBITDA at €41 million and EBIT at €28 million. While these adjusted figures were modestly below consensus expectations, the bank noted they still represent a clear operational improvement compared to the previous year.
The brokerage stated that the combination of stronger underlying business performance and the company's raised full-year guidance justifies a more constructive view. This prompted the upgrade to "Buy" and the more than 70% increase in its price target, despite a recent rally in the shares.
Market Reaction
In Frankfurt trading on Monday, shares of SMA Solar slipped 0.7% to €61.10. The stock's performance lagged the broader German DAX index, which was down approximately 0.2% during the session.
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