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Shares of Caesarstone Sdot-Yam Ltd (NASDAQ: CSTE) have been under pressure on concerns over a slowdown in US revenue growth. Chardan Capital Markets’ Lena Rogovin initiated coverage of the company with a Buy rating and a price target of $44.
The US represents CaesarStone’s largest market, accounting for 45 percent of the company’s sales. CaesarStone’s shares have plunged 44 percent in the past 12 months, mainly on concerns surrounding a deceleration in US revenue growth. Analyst Lena Rogovin wrote, however, that there is significant upside to the company’s shares, even with a reduced sales guidance.
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US Market
Quartz penetration in the US is merely 8 percent, and is growing, Rogovin pointed out. Every 1 percent increase in penetration adds $350mn per annum to the company’s US target market. “As the number 2 player in a global quartz surfaces market, CSTE is well positioned to grow from increasing quartz usage for kitchen countertops, especially in the US and Canada,” the analyst mentioned.
Competition
Although competition is increasing, it is mainly from lower end manufacturers, while CaesarStone offers a premium high quality differentiated product, and the company does not have plans of expanding into the lower-end segment.
Growth Estimates
Rogovin estimates the company’s organic revenue CAGR at 10 percent and EBITDA CAGR at 13 percent for 2016-2018. More than 60 percent of incremental growth is expected to come from the US market.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.