UPDATE: Axiom Capital Research Initiates Sell, $26 Target on Axiom Capital Research
Axiom Capital Research initiates coverage of Axiom Capital Research (NYSE: PPO) with a Sell rating and a price target of $26 a share as it expects the stock's high multiple, afforded by its fast-growing electric car business for its lithion batteries, to debase in the coming months.
Axiom Capital Research comments, "We believe PPO's margins peaked in 2011, and see severe risk to the company's operating margins in 2H12/2013 as pricing pressures mount (PPO is currently ramping 5 new lines for a cost of approximately $334mn, which we believe will take its annual capacity from 74.5mn square meters in 2Q10 to 240mn square meters in 4Q14, requiring elevated OPEX). As PPO's margins begin to contract (a dynamic we anticipate will emerge over the next 6 months), we expect the company's multiple to debase. Applying a 12x multiple to our 2012 EPS estimate of $2.17, we believe the stock is overvalued by at least 54%."
PPO closed at $56.38 a share on Friday.
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