Q: Hi, Hammond Power stock is now tracing back to the levels, traded at, two quarterly earnings ago, down to $98, from a high of $160, not long ago. Apparently, the sell off was caused by some stock compensation concerns and profit taking. From business, operations and financial perspective, company seems solid and stock, now trading at a low valuation of 16/17 times forward earnings ( I believe ). With power/electricity consumption and infrastructure demand , expected to multiply exponentially ( AI/Data Centres etc ) over several years, market for company's speciality transformers should continue to be strong with a long runway of growth.
Analysts are still quite bullish on the co. with price targets ranging from $156 to $167.
So, in your opinion, what could be the basis of the continued weakness in its stock price ?
Do you believe that stock will be higher, say 50%, in 2-3 years from now and should be bought/added aggressively at these depressed levels ?
Thank You
Analysts are still quite bullish on the co. with price targets ranging from $156 to $167.
So, in your opinion, what could be the basis of the continued weakness in its stock price ?
Do you believe that stock will be higher, say 50%, in 2-3 years from now and should be bought/added aggressively at these depressed levels ?
Thank You
5i Research Answer:
Some US commentators have commented that they expect the clean power and AI boom to slow down and this likely was one factor in addition to the stock-based compensation confusion. It is 17X earnings but there has been no material news since the release of the Q1 results. Profit-taking pre-June 25 might be a small factor here. But nothing really has changed and we do see the sell-off as an opportunity for buyers.