Johnson Matthey’s Shares (LON: JMAT) Looking For Reversal, Analyst Moves Down PT

Johnson Matthey shares (LON: JMAT) have kicked off the new week in red territory, down 0.7% in a flip flop first hour for the stock. Having gapped down slightly on open, starting at 1535 from the recent close of 1542, the share price swiftly gained almost 1% before taking a sudden reversal. With JMAT down 8.32% on a YTD basis, recent downgrades in price targets may be worth looking at.

Berenberg analysts adjusted their target price for the chemicals company, lowering from 1,800.0p to 1,650.0p on Thursday, underlining an apparent cautious stance by the German bank. Despite this reduction, the analysts noted that the company's management has commendably navigated past potential missteps and effectively “righted the ship,” particularly following Johnson Matthey's decision to exit the battery materials business.

Sustaining a ‘hold' rating on the stock, Berenberg's assessment conveyed mixed sentiments towards the company's future prospects. One area of optimism highlighted by the analysts is the firming of platinum group metals pricing, alongside the progressive development of a new energy pipeline within the catalyst technologies sector. These factors can be seen as promising indicators for Johnson Matthey's medium to long-term growth trajectory.

In reviewing the broader context, Berenberg reflected on the pre-electric vehicle surge era, characterised by profit warnings from larger European automotive makers. Such an environment was viewed as unfavorable for Johnson Matthey shares, suggesting that recent strategic movements by the company may now position it better amidst the transition to electric vehicles.

However, Berenberg did make cuts to their EPS estimates for Johnson Matthey, attributing this action to a confluence of factors. These included currency fluctuations, diminished volumes, and marginally lower prices in the Clean Air segment, coupled with the earlier than anticipated divestment of value-driven businesses. Further headwinds were identified from the decrease in volumes recycled in Platinum Group Metals (PGM) services, a trend possibly linked to consumers retaining their cars for extended periods before scrapping them in a landscape of rising interest rates.

In terms of trading multiples, Johnson Matthey's shares are currently trading at six times their 2025 estimated EV/EBITDA, according to Berenberg. This multiple provides an assessment of the company's current market value relative to its forecasted earnings before interest, taxes, depreciation, and amortisation, which is a commonly used metric for gauging company performance and potential investor returns.

While Berenberg's alterations to Johnson Matthey's target price and EPS estimates may indicate short to medium-term financial prudence, the underlying observations suggest cautious optimism in the company's strategic realignment and growth opportunities in the transforming automotive and materials landscape. Investors and market watchers will likely closely observe how these factors play out in affecting Johnson Matthey's market position and financial health in the forthcoming periods.