Deutsche Bank Upgrades Ply Gem On 'Window Of Opportunity'

In a report published Monday, Deutsche Bank analyst Nishu Sood upgraded the rating on Ply Gem Holdings Inc PGEM from Hold to Buy, while raising the price target from $12 to $16. With low expectations from the company and operational issues being mostly in the past, the stock offers a "window of opportunity."

"We see an opportunity in the stock because fundamentals should turnaround and expectations are low. Housing momentum has picked up meaningfully since late 2014 and Ply Gem should benefit from this," Sood elaborated.

While the company was hit hard when the housing mini-bubble burst in 1H13, the analyst believes that most of the company specific issues have been resolved and that there is opportunity for margin leverage from a low base.

Ply Gem has amongst the highest exposure to new residential construction, among the building products companies, at 49 percent, which proved to be a headwind from 2H13 through 2H14. However, housing momentum has been accelerating, with new home sales rising 24 percent year-on-year.

According to the Deutsch Bank report, "[A]lthough weather has dampened construction so far this year, the catch-up could produce a stronger than expected rebound in 2H15."

However, the consensus expectations for revenue growth for the company continue to be low for 2015 and 2016.