Arrow Downgraded on Weak Demand, Hertz's Growth Justifies Valuation, Nike's Upside Seen
Arrow Electronics has been downgraded by Credit Agricole due to weak component demand and high valuation. Meanwhile, Hertz Global's rapid growth may justify its valuation, but its high debt load could be a concern.
Arrow Electronics' stock has been downgraded from 'outperform' to 'underperform' by Credit Agricole. The bank cited 'weaker component demand' and a 'too-high valuation' as reasons for the downgrade. Arrow's stock has a P/E ratio of 8.5, but earnings growth is expected to be only 1% annually over the next five years. This slow growth may not justify its current valuation.
In contrast, Hertz Global's enterprise value-to-free cash flow ratio is less than 22, suggesting its rapid growth may indeed justify its valuation. However, the company has a high debt load of $12.2 billion, which could be a concern for some investors. Despite this, Hertz Global has received a new price target of $26 from MKM Partners, driven by its high projected earnings growth rate of 38%.
On the other hand, Nike's stock is expensive with a P/E ratio over 21, and earnings growth is expected to be only 8% annually over the next five years. Despite this, Stifel Nicolaus has raised its price target for Nike's stock from $104 to $110, indicating a potential upside despite its recent underperformance.
Arrow Electronics faces challenges with weak demand and high valuation, while Hertz Global's rapid growth may justify its valuation, despite its high debt load. Nike's stock, though expensive, has seen a raised price target, suggesting potential future growth.
