On Monday, Morgan Stanley initiated coverage on Crown Holdings (NYSE:CCK), a major player in the global beverage can market, with an Equalweight rating and an $87.00 price target. The firm highlighted Crown's strong position in Southeast Asia and its potential for volume outperformance in North America due to specific growth drivers such as contract wins and a favorable category mix.
Despite Crown Holdings' status as the second-largest entity in the beverage can sector and its leading market position in Southeast Asia, Morgan Stanley noted that the company's international beverage can exposure and non-core business could face pressures in 2024. The analyst pointed out that Crown Holdings is trading at a 3.5 turn discount to its peer, Ball Corporation (NYSE:BALL), on an EV/EBITDA basis, suggesting that Crown's shares may be undervalued.
However, the firm indicated that there are few catalysts anticipated that might lead to a relative re-rating of the stock, barring an unexpected positive demand surprise, which the analyst is not forecasting. The $87 price target set by Morgan Stanley is based on a 10x multiple of Crown's estimated 2024 EBITDA, excluding minority interest.
Morgan Stanley's analysis suggests that the potential outcomes for Crown Holdings' stock are skewed slightly to the upside, with bull and bear scenarios indicating a possible +55% gain or a -48% loss. The lack of clarity regarding the company's non-core and Southeast Asia businesses has contributed to the decision to maintain an Equalweight rating.
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