RE:Canaccord upgradeLooks like a deliberate attempt to keep the share price target low when XBC just announced a monster contract that exceeded it's 2021 annual revenues.
execution risk concern: UEC has been mfg compressors for 38 years, these will be standardized units in 2 configurations, sure there will be always be a learning curve, but the expertise is there and XBC also has another company that has compressor experience to provide input: NO ISSUE
input cost concerns; XBC likely used similar terms to their MSA BGX contract which protects them from inflationary costs, most mfg do so and have the ability to pass on increased input costs to their customers : NO ISSUE
Double dipping on the valuation multiple: they previously gave XBC a 2.1 EV/S using industrial gas players as a peer (stodgy, low growth business). Now to account for the large $142M contract, they need to further discount the EV/S multiple to 1.8 to keep a ridicuously low target price of $2.50. Shame on them for not keeping the 2.1 EV/S multiple, else it would have been a mind blowing $2.90 target price, LOL.
I don't recall another occurrence where a company gets a monster contract and the analysts reduces the valuation multiple further. Seems like there is a concerted effort to keep target prices low to discourage buyers / encourage sellers once the target price is hit. Another great report that may be of use for the short sellers, esp. when XBC trades above the "depressed" target price.
Dunworkin2 wrote: Canaccord Genuity’s Yuri Lynk raised his target for Xebec Adsorption Inc. (XBC-T) to $2.50 from $2.25, reiterating a “hold” recommendation. The average is $3.06.
“We believe Xebec is well positioned to benefit from the increased demand for renewable gases that we see evolving from the energy transition,” he said. “This growth potential was evident in management’s strategic three-year plan released last month. Nonetheless, we remain on the sidelines as we await signs of improved execution, especially with input cost inflation and logistical issues likely to weigh on Q1/2022. Currently, Xebec trades at 2.1 times EV/Sales (2022E) versus industrial gas peers at 2.5 times. We set our target using 1.8 times EV/Sales (2023E) down from 2.0 times previously. The reduction in our target multiple reflects our concern Xebec may struggle to profitably replace this carbon capture order when it rolls off next year and the execution risk associated with such a large contract.”