Investing.com -- BofA Securities has upgraded AutoStore (OL: AUTO ) to “buy” from “neutral,” citing a sharp disconnect between the company’s valuation and its underlying fundamentals, in a note dated Thursday.
Shares of the Norway-based company were up 9.2% at 03:44 ET (07:44 GMT).
The analysts point to the recent selloff as overdone and view the current price level as an attractive entry point.
The price objective is lowered to NOK10 from NOK12.4 due to reduced earnings forecasts, but still implies meaningful upside from current levels.
AutoStore is trading at around 9x 2026 EV/EBITA, representing a discount of more than 40% to its historical average since the company’s IPO in 2021.
The stock has underperformed the broader STOXX Europe 600 Industrial Goods & Services Index (SXNP) by 31 percentage points year-to-date and by 88 points since listing.
BofA has cut its profit and loss estimates for 2025–2027 by roughly 9–18%, primarily due to weaker expected demand from the US market, which contributed 22% of revenues in 2024.
This is down from 29% in 2023 and 39% in 2019. The analysts highlight that tariff-related uncertainty and broader macroeconomic concerns are delaying customer investment decisions in the region.
Despite the challenges in the US, Europe remains the company’s core market, accounting for 63% of 2024 revenues, with Germany alone representing 22%.
BofA expects infrastructure-related tailwinds in Germany beginning in 2026 to support growth. This regional positioning is seen as a relative strength in the current environment.
Operationally, AutoStore has maintained strong margins despite stagnant revenue. Between 2022 and 2024, revenues declined by about 2%, yet adjusted EBIT rose by about 12%, helped by increased production efficiency and standardisation.
Gross margins reached approximately 73% in 2024, while adjusted EBIT margin was 42%. The company is expected to be net cash by 2026.
BofA remains cautious on short-term demand recovery, noting that warehouse automation investments are often deferrable.
Many clients are likely to wait for improved macro conditions and further interest rate cuts before proceeding with automation projects. As such, the bank does not anticipate a growth inflection in early 2025.
Still, the mid- to long-term growth outlook remains intact. AutoStore operates in the light automated storage and retrieval system (AS/RS) segment, which is projected to grow at an annual rate of 13% through 2032.
Within the cubical sub-segment, AutoStore holds about 97% market share by installations and backlog. These solutions, known for their space efficiency, are increasingly relevant in urbanised logistics environments.
The customer base has expanded from 47 in 2014 to 1,150 by the end of 2024, representing a compound annual growth rate of 38%.
The company also reports that 70% of customers onboarded before 2020 have placed repeat orders. Installations per customer have increased modestly, from 1.2 to 1.4 over the same period.
BofA’s 2025 revenue estimate of $562 million is approximately 9% below consensus. The bank expects a 7% revenue decline next year, followed by a 10% rebound in 2026.
The company’s backlog currently covers around nine months of revenue, offering some visibility, though delivery timelines remain flexible.
Management has not reiterated prior guidance of a 40% compound annual growth rate and did not provide forward revenue targets at its 2024 Capital Markets Day.
BofA believes the current valuation already reflects these revised expectations and sees room for multiple expansion as macro conditions stabilise.
Upside risks include stronger-than-expected e-commerce growth, higher warehouse automation penetration, and faster uptake of cubical systems.
Downside risks involve slower adoption of automation solutions and potential quality issues with AutoStore’s technology.