On Thursday, BofA Securities analysts upgraded Randstad NV (AS:RAND:NA) (OTC: RANJF) stock rating from Underperform to Buy and increased the price target to EUR 42.00, up from EUR 39.50. The adjustment comes as the staffing company's shares have seen a significant decline compared to the market over the last three years.
The analysts pointed out that despite the mixed macroeconomic conditions in Europe, where approximately 70% of staffing companies' revenue is generated, there are emerging signs of market stabilization. Specifically, recent staffing data from the Netherlands indicated initial signs of stability, even with challenging year-over-year comparisons.
Furthermore, the North American market is showing sequential improvements. BofA Securities' proprietary Staffing Indicator suggests that the growth momentum for staffing services is expected to reach a low point after the first quarter of 2025. While the analysts anticipate further earnings downgrades, with their adjusted EBITA for 2025 being 2% below the consensus, they believe that the greater risk lies in the first half of the year, with their estimates being 4% below consensus.
The report also notes that historically, Randstad's stock tends to rally a few months before earnings per share forecasts hit their lowest point. Additionally, the analysts observed that the current market positioning for Randstad is light, with short interest standing at 9%, which equates to almost 28 days of cover. This is in contrast to Adecco (SIX:ADEN), which has less than 17 days of cover.
The upgrade reflects a more positive outlook on Randstad's potential for recovery and growth in the staffing market, despite the ongoing challenges and anticipated earnings adjustments.
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