Tenneco Soars 16% in Pre-Market Trading On Carl Icahn Stake Disclosure

This is a volatile time for the stock. Shares plunged 21% on Friday after Tenneco withdrew its first-quarter and full-year guidance due to Covid-19 related uncertainty and suspended or reduced operations across several regions. In a press release, CEO Brian Kesseler commented: “The continuing near-term deterioration in demand in our end markets necessitates further difficult decisions.”

As a result, JP Morgan’s Ryan Brinkman downgraded the stock from buy to hold- and dropped his price target from $7 to $5. The analyst stated: “Our implied blended average EV/EBITDA target multiple is approximately ~5.5x on our 2021 estimates, below the sector average currently.”

Indeed, the Street is displaying a more cautious sentiment than Icahn when it comes to Tenneco stock, with a Hold consensus based on the last three months of analyst ratings. Meanwhile the average analyst price target suggests 147% upside potential from current levels. (See TEN’s stock analysis on TipRanks)

However, despite downgrading the stock, Brinkman does perhaps offer some insight into Icahn’s stock purchase, writing that TEN shows “a clear and compelling sum-of-parts valuation case (management intends to separate the businesses in mid 2020), which suggests material upside to valuation even in the case of conservatively valuing the purportedly structurally challenged Powertrain Technologies business at a lower multiple than any other supplier we cover.”

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