Morgan Stanley Begins Covering Rockwell Automation, Anticipates Strong Growth Opportunities.
Source: Davit Kirakosyan
Morgan Stanley analysts have recently initiated coverage on Rockwell Automation (NYSE:ROK), assigning an Overweight rating and setting a price target of $320 for the stock. The experts perceive a favorable risk-reward proposition in Rockwell, underscoring the potential growth opportunities in the sector despite the stock hitting a multi-year low. This downtrend comes in the midst of a thriving U.S. reshoring movement, indicating a massive $10 trillion long-term opportunity in industrial automation.
Projections from the analysts suggest a substantial recovery in Rockwell’s orders, with a predicted 30% year-over-year surge expected in the fourth quarter of 2024 and continuous double-digit expansion throughout fiscal 2025. This uptick in orders could signal the end of negative revisions and prompt a revaluation of the stock. Currently trading at a 20% premium compared to the S&P 500, a lower figure than its historical 40-50% premium during previous upcycles, Rockwell potentially has room for a 4-5 turn re-rating.
The analysts anticipate a boost in U.S. manufacturing capital expenditures (Capex) as a positive influence after years of stagnation, positioning Rockwell well to seize opportunities as the nation attracts global investments. The surge in project initiations, running at 2.5 times pre-Covid levels, and the increased efficiency in automation spending due to heightened wages lead the analysts to believe that the recent devaluation of Rockwell’s stock presents an attractive investment prospect.