- Stephens analyst Trey Grooms raised the price target for Azek Company Inc AZEK to $26 (an upside of 24%) from $20 while maintaining the Overweight rating on the shares.
- AZEK reported a solid quarter but significantly reduced its 4Q22 outlook as the channel continues to de-stock at an accelerating pace in light of moderating end-market demand, notes the analyst.
- Grooms believes the prior year period had a large channel in-fill, and lead times have improved dramatically, so distributors don't feel the need to carry as much inventory.
- Inventory reduction is expected to last for the next two quarters. The analyst believes FY23 pricing should benefit from increases already in place, and raw material moderation and increased recycling will aid margins.
- Grooms states that AZEK was a clear beneficiary of COVID trends and is now seeing the reversal of these tailwinds. The analyst thinks the valuation reflects this, and the longer-term secular growth and margin improvement story remains intact.
- Wedbush analyst Jay McCanless downgraded Azek to Neutral from Outperform and lowered the price target to $21 from $24.
- The analyst mentions that a potentially overstuffed sales channel and a sales headwind from the prior year's product load-in may deliver difficult sales comps for the next two quarters.
- With renovation predictions and building material sales increasing positively, McCanless finds it challenging to comprehend how Azek may have slower sales and too much inventory in the channel.
- Price Action: AZEK shares are trading lower by 2.56% at $20.90 on the last check Monday.
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