On Monday, Morgan Stanley (NYSE:MS) analysts upgraded Ardagh Metal Packaging (NYSE:PKG) S.A. (NYSE:AMBP) stock rating from Underweight to Equalweight.
The revision reflects a reassessment of the company's position following a recent decrease in its stock value.
The firm noted that Ardagh Metal Packaging's shares are expected to continue trading at a discount compared to its competitors, BALL Corporation and Crown Holdings (NYSE:CCK), Inc., due to its challenging cash flow situation.
Adjusting the price target to $3.10 from the previous target of $3.60, the firm noted that the company's financial flexibility is constrained by a highly leveraged balance sheet, with a net debt to EBITDA ratio of 5.3 times, high interest expenses, and significant dividend obligations to its parent company.
The analyst's decision to upgrade the stock rating was influenced by the performance of Ardagh Metal Packaging's shares, which aligned with Morgan Stanley's previous Underweight call. With the shares having already experienced a devaluation, analysts sees a more balanced risk-reward scenario moving forward.
In setting the new price target, Morgan Stanley has applied a multiple of approximately 8.25 times the company's estimated 2025 enterprise value to EBITDA, a slight reduction from the previous 8.5 times multiple. This adjustment accounts for the current macroeconomic softness and continues to factor in a discount relative to the company's peers.
The updated price target of $3.10 is based on these revised valuation metrics and the expectation that Ardagh Metal Packaging will maintain a lower valuation in comparison to its industry counterparts due to its financial challenges.
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