AutoStore Faces Revenue Challenges Amid Rating Downgrade

AutoStore's Revised Stock Rating and Market Challenges

Recently, BofA Securities made a notable adjustment to its position on AutoStore Holdings Ltd (AUTO:NO), moving the company's stock rating from Buy to Neutral. This change was accompanied by a fresh price target, which now stands at NOK11.00, a significant decrease from its earlier target of NOK19.00.

Insights from the Capital Markets Day

This downgrade followed AutoStore's 2024 Capital Markets Day, where company leadership expressed optimism about mid-term market prospects. Nevertheless, they did not shy away from recognizing the current market weaknesses that are impacting their performance in the short term.

Revenue Projections and Market Expectations

During the update, AutoStore revealed that its revenue forecasts for the third quarter and the entirety of 2024 have fallen below market expectations. Specifically, the predictions fell short by around 11% for the third quarter and approximately 5% for the overall year, raising concerns among investors and analysts alike.

Delivery Concerns and Project Pipeline

Although AutoStore continues to boast a solid project pipeline, BofA Securities expressed wariness concerning the company’s ability to deliver on its backlog. This caution extends into 2025, as the team noted that prolonged decision-making processes among clients are delaying both order intake and fulfillment of existing backlogs.

Adjustments to Financial Estimates

In light of these challenges, BofA Securities has revised its revenue and adjusted EBIT estimates for AutoStore for the years 2025 and 2026, cutting them by around 10-15%. The new projections are now estimated to be roughly 5% below the consensus for the company's adjusted EBIT for 2025, signaling the need for further scrutiny on AutoStore's financial health.

Valuation Adjustments Reflecting Market Conditions

BofA Securities’ approach to valuing AutoStore has also shifted. The firm now applies a 25% discount compared to the multiples of high-quality industrial peers, a step up from the previous 20% discount. This revised valuation methodology is anchored on 19 times the expected enterprise value to EBITA of AutoStore's industrial counterparts. BofA justifies this discount by highlighting the high-margin model of AutoStore, which currently faces challenges regarding revenue predictability in the near future.

Conclusion and Future Outlook

As AutoStore navigates this period of uncertainty, it is crucial for stakeholders to remain informed about company developments and market trends that could influence its trajectory. Ongoing monitoring of revenue visibility and the response to the evolving market landscape will be essential for understanding how AutoStore might recover and adapt in the future.

Frequently Asked Questions

What factors led to BofA Securities downgrading AutoStore's stock rating?

BofA downgraded AutoStore's stock from Buy to Neutral due to lower revenue projections and challenges in the market impacting business performance.

How much has the price target changed for AutoStore?

The price target for AutoStore's shares has been reduced from NOK19.00 to NOK11.00 by BofA Securities.

What were AutoStore's revenue projections for 2024?

The revenue projections for the third quarter and full year of 2024 fell short of market expectations by around 11% and 5% respectively.

What concerns did BofA express regarding AutoStore's operations?

BofA expressed concerns about the delay in order intake and backlog fulfillment due to extended decision-making cycles among customers.

What valuation changes did BofA make for AutoStore?

BofA increased the discount applied to AutoStore’s valuation from 20% to 25% compared to its industrial peers, reflecting significant market challenges.

About The Author

Hi there, I'm Hannah Lewis, a writer and financial specialist of 36 years old committed to making money understandable and approachable to everyone. Years of working in the field have given me a thorough grasp of market trends, investment techniques, and economic fundamentals. My objective is to enable people, by means of understandable, useful guidance, to take charge of their financial destiny.

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