UBS analysts downgraded American Axle (NYSE:AXL) & Manufacturing stock (AXL) to Sell on Tuesday and trimmed the price target on the stock from $8 to $6.5, implying over 10% downside from the current share price.
Analysts said the rating change is attributed to three key points, including limited EBITDA growth beyond 2023, potential challenges in a higher capex cycle for AXL, and a perceived overly optimistic outlook for future years.
AXL stock fell 9% on Wednesday.
“While we see some improvement in EBITDA from 2023 levels given the strike impact and operational challenges faced in 2023, beyond that we have difficulty seeing meaningful EBITDA growth. So EBITDA has generally peaked,” analysts wrote in the note.
UBS also argued that American Axle could face a “higher capex cycle” compared to the recent subpar years, restricting potential free cash flow (FCF).
Moreover, the forward-looking consensus appears ambitious, especially as GM's electric trucks are expected to gradually displace internal combustion engine variants, they added.
“This concern, and potential negative revisions, could limit the multiple. We believe the market is pricing in 2025 Adj. EBITDA of ~$769mm or ~10% above new 2025 forecast.”