BYD stock is a pass right now, Desjardins says

A tough macro environment has Desjardins analyst Gary Ho maintaining his “Hold” rating on Boyd Auto Group (Boyd Auto Group Stock Quote, Chart, News, Analysts, Financials TSX:BYD).

On November 10, before the market open, BYD will release its Q3, 2023 results.

The analyst gave an overview of what he expects on that day.

“We trimmed our SSSG for 3Q and 4Q given tough comps and introduced our 2025 estimates,” he wrote. “An update on the impact from the extended UAW strike will be topical. We expect a small 2.1% dividend increase to be announced alongside results. Our target declines to C$270 (from C$280) on slightly lower estimates and valuation (reflecting peers’ multiple compression), partially offset by rolling our valuation forward one quarter and higher FX (C$1.37/US$1 vs C$1.33/US $1 previously).”

In a research update to clients October 26, Ho maintained his “Hold” rating but cut his one-year price target on BYD from $280 to $270, implying a return of 16.8 per cent at the time of publication.

The analyst expects Boyd will post Adjusted EBITDA of (US) $92-million on revenue of $722-million in the third quarter, below the topline consensus of $732-million.

“While we remain constructive longer-term, we note (1) tougher SSSG comps starting in 2H23; (2) wage pressure persists with a tight US labour market; and (3) as a result, it is harder to expand margins meaningfully,” the analyst concluded.