REVG - REV Group stock rises as Baird says 'shares could double'

2023-03-06 07:26:16 ET

REV Group ( NYSE: REVG ) was upgraded to Buy at Baird as equity analyst Mircea Dobre voiced her belief that shares are significantly undervalued.

He explained that easing supply chain constraints, high backlogs, and the company’s opportunity to bolster margins make the stock attractive at present. Additionally, despite some macro uncertainty, the strong backlog gives Dobre confidence in the longer term trajectory for the company.

“Visibility extends into 2025 even in a tougher macro environment, this should make REVG shares attractive relative to other small cap machinery,” Dobre told clients. “It is important to recognize that [fire and emergency] has ALL its production through 2024 already in backlog with additional new orders supporting 2025 and beyond.”

He added that the recreation and commercial backlogs also provide visibility well into 2024. The visibility into the next year is clearer than anywhere else in her coverage, Dobre commented.

“We see potential for the shares to double,” He concluded. “The setup here is somewhat similar to [Manitowoc Company] (stock up 114% YTD, S&P500 +2%) as low expectations couple with gradual operating improvement…As tangible evidence of production/supply chain improvement emerges, we expect multiple expansion; higher multiple coupled with rising earnings expectations could double the stock.”

Shares of REV Group ( REVG ) rose 3.5% on light volume in premarket hours on Monday.

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