On Friday, a Wells Fargo analyst announced an upgrade for Huntsman Corporation (NYSE:HUN), shifting the stock's rating from Equal Weight to Overweight. Accompanying this upgrade is a significant increase in the price target, now set at $32.00, elevated from the previous figure of $25.00. The optimism stems from expectations of a modest earnings improvement in 2024, with projected EBITDA (earnings before interest, taxes, depreciation, and amortization) rising to $500 million, up from $472 million in 2023.
The analyst anticipates a stronger financial performance for Huntsman in the second half of 2024, which is likely to catalyze a robust recovery in 2025, with EBITDA forecasts exceeding $700 million. The assessment suggests that Huntsman's mid-cycle EBITDA could approximate $900 million. Historically, the company has traded at an enterprise value to EBITDA (EV/EBITDA) multiple ranging from 6 to 9 times.
The upgraded price target is justified by the expectation of trading around 7.5 times the mid-cycle EBITDA or about 13 times the projected EBITDA for 2024. This valuation presents an attractive upside for the stock. Furthermore, the analyst pointed out that Huntsman's balance sheet remains in a "decent shape," with a net debt to EBITDA ratio at 2.4 times for the year 2023. This financial stability adds to the positive outlook for the company's stock as it moves forward.
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