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The ARB Corporation Limited (ASX: ARB) the stock price ends the week on a very positive note.
In afternoon trading, shares of the 4 × 4 parts maker are up 6% to $ 50.68.
Why is the ARB share price higher?
The catalyst for the rise in the ARB share price today appears to have been a broker note from Citi this morning.
The memo was in response to the company’s annual general meeting update on Thursday, which revealed that fiscal 2022 has started on a positive note.
The company said: “The restrictions induced by the pandemic in the first quarter of fiscal 2022 have impacted ARB in a number of its markets, including significant lockdowns in Victoria and New South Wales. . Despite these restrictions, business performance remained strong in the quarter with satisfactory growth in sales and earnings. “
“ARB’s order book remains strong, both nationally and internationally, and the company continues with its product development work, its store development program in Australia and the expansion of its manufacturing capacity,” said he added.
What did Citi say?
In response to the update, the Citi team upgraded the company’s shares to a buy rating with a price target of $ 55.45.
Based on the current ARB share price, this implies a potential rise of 9.4% for investors, even after today’s strong gain.
Citi commented, “The 1Q22 business update showed better earnings momentum despite lockdowns in NSW and Victoria. We are putting ARB to Buy (from Neutral) following the -11% share price decline since its peak in August 2021, as we see potential for sales and earnings to accelerate in 2Q22 with the reopening of NSW and Victoria. “
“ARB also has significant medium-term growth drivers, including i) its partnership with Ford, ii) distribution gain opportunities in the United States, iii) development opportunities in Europe and iv) expansion of its manufacturing plant in Thailand, ”he added.
The ARB share price could now rise 63% in 2021, but Citi seems to think it could rise further.