HDSN - Hudson Technologies: The Growth May Be Delayed But It's Still A Buy
2024-05-03 11:54:56 ET
Summary
- Hudson Technologies holds the largest share of the U.S. refrigerant reclamation market. This market is poised for long-term growth.
- The company's long-term thesis regarding reclaimed HFC demand is still intact, despite a downturn in revenue and profitability in Q1 2024.
- Hudson's management expressed concerns about achieving its previously stated 2025 revenue target of $400 million due to lower-than-expected HFC pricing and a larger-than-anticipated stockpile of virgin HFCs in the market.
- After a pullback in share price, I consider Hudson a Strong Buy for long-term investors.
Investment Thesis
The AIM Act may provide Hudson Technologies ( HDSN ) with a sustainable growth catalyst and allow it to take advantage of its operating leverage as the reclamation market expands. Hudson holds the largest share of the U.S. refrigerant reclamation market and a technology advantage over competitors. With a strong balance sheet, and a management team focused on the long-term opportunity created by the AIM Act, Hudson could generate incredible returns for long-term holders. I consider Hudson a Strong Buy.
Upgrading To Strong Buy After Sell-Off
HDSN stock has fallen post-earnings due to uncertainty about the near- and medium-term outlook for revenue. In my previous article , I outlined my long-term thesis centered around the impacts of the AIM Act and how it should drive sustainable growth for Hudson. A supply and demand imbalance tilted towards increased reliance on reclaimed refrigerants is still likely to increase demand for Hudson's services and products and drive the prices higher over the long term. However, this growth might be delayed for several quarters after Hudson CEO, Brian Coleman removed the company's 2025 revenue target and provided uncertainty about HFC demand due to increased stockpiles of virgin HFCs....
Hudson Technologies: The Growth May Be Delayed But It's Still A Buy