On Monday, Baird adjusted its outlook on WillScot (NASDAQ:WSC) Mobile Mini (NASDAQ:MINI_old) Holdings Corp. (NASDAQ:WSC) shares, lowering the price target to $45 from the previous $55, while still maintaining an Outperform rating.
The revision reflects concerns over weakening company fundamentals, the impact of potentially higher interest rates, and the ongoing Federal Trade Commission (FTC) review of WillScot's proposed acquisition of Mobile Mini General Rental Center (MGRC).
The analyst noted that the shares of WillScot Mobile Mini have been underperforming due to these factors, as well as the potential for increased cash taxes stemming from the expiration of bonus depreciation. In light of these headwinds, there is a possibility that the company might reduce its financial guidance when it reports earnings.
Despite these challenges, Baird's outlook remains positive for long-term investors. The firm believes that the current share price already reflects the aforementioned negatives, with little valuation credit given to the potential benefits of the MGRC deal. The analyst highlighted the attractive high single-digit free cash flow yield, which is considered counter-cyclical, as a key reason for maintaining the Outperform rating.
The reduction in the price target suggests a more cautious view of WillScot Mobile Mini's near-term prospects, but the retention of the Outperform rating indicates a belief in the company's long-term value.
InvestingPro Insights
As investors digest Baird's revised outlook on WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC), real-time data and insights from InvestingPro could offer additional context. The company boasts an impressive gross profit margin of 56.41% over the last twelve months as of Q1 2023, which underpins its financial strength despite recent headwinds. Additionally, with a PEG Ratio of 0.4, WillScot appears to be trading at a low price relative to its earnings growth, which could signal an attractive entry point for investors considering the company's long-term prospects.
InvestingPro Tips highlight that management's aggressive share buybacks and the stock being in oversold territory according to the RSI could be factors for investors to watch. These actions may reflect management's confidence in the company's value and suggest potential for a rebound. It's also worth noting that analysts have revised their earnings expectations downwards for the upcoming period, which could influence the stock's short-term performance.
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