On Monday, Roth/MKM adjusted its financial outlook on Shimmick Corp (NASDAQ: SHIM), lowering the price target to $9 from the previous $10, while maintaining a Buy rating on the company's shares. The decision reflects the impact of ongoing challenges related to projects associated with AECOM, which have been affecting the company's financial performance.
Shimmick Corp's recent results fell short of expectations, largely due to the continued drag from AECOM-related projects. However, Roth/MKM anticipates that as Shimmick moves through the year, this pressure will diminish. The firm expects the company to transition to higher margin, less risky projects that have been bid on over the past couple of years.
Despite these challenges, Roth/MKM remains optimistic about Shimmick's long-term prospects, particularly in the water infrastructure sector. The firm believes that Shimmick is well-positioned to take advantage of a secular increase in investments in this area, which is expected to play out over the next 7 to 10 years.
The lowered price target to $9 reflects the anticipated short-term friction from the company's exit from AECOM-related projects. Roth/MKM suggests that Shimmick's stock may stay within a certain range in the near term until signs of improved financial results, such as higher gross margins, become evident.
Roth/MKM's outlook for Shimmick Corp remains positive despite the near-term headwinds. The firm advises that any weakness in the stock's price could present a buying opportunity, as it continues to endorse Shimmick with a Buy rating, expecting the company to eventually overcome the current challenges and benefit from the favorable industry environment.
InvestingPro Insights
Adding to the analysis by Roth/MKM, InvestingPro data provides a deeper financial perspective on Shimmick Corp (NASDAQ: SHIM). The company's market capitalization stands at $147.31 million, indicating its size within the market. Despite the challenges, SHIM is currently trading at a low revenue valuation multiple with a Price/Book ratio of 2.07 as of the last twelve months ending Q4 2023, which could suggest a potentially undervalued stock.
InvestingPro Tips highlight that, while Shimmick holds more cash than debt on its balance sheet, it is quickly burning through cash and has been trading near its 52-week low. The company's stock has taken a significant hit over the last week, with a price total return of -18.07%, aligning with Roth/MKM's observation of near-term pressure. Analysts do not anticipate the company will be profitable this year, with gross profit margins remaining weak at 3.54%.
For investors looking for further insights, there are additional InvestingPro Tips available that could help in making a more informed decision. Interested readers can find these tips on InvestingPro's platform by visiting https://www.investing.com/pro/SHIM. Plus, with the use of coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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