UPDATE: Morgan Stanley Initiates TransDigm Group at Underweight on Growth Slowdown

Morgan Stanley initiated coverage on TransDigm Group

with an Underweight rating and a $130 price target. Morgan Stanley noted, "TDG has a solid track record of generating growth through acquisitions, but with shares up over 50%YTD, we do not think the current valuation reflects the impending slowdown in revenue growth, modest returns on capital and potential margin pressure. … TDG's management team has done an excellent job over the past several years executing on its growth-through-acquisitions strategy, but at >4x Net debt/EBITDA, greater competition for acquisitions, and an increasingly large revenue base, it will be difficult for TDG to sustain recent growth trends through acquisitions. With the stock trading at 20.2x F13e, near all-time highs on both an absolute basis and relative to peers, TDG appears priced for perfection." TransDigm Group closed at $147.39 on Monday.