Analysts Praise Delticom's Performance
Financial analysts have given Delticom AG a “Buy” rating and a set 24 euro target price, above the company’s current level of around 20 euros. The Deutsche Bank analysts described Delticom as “a very attractive business model in the fragmented tyre replacement market” and were clearly impressed with their performance to date. “In 2009, one of the worst years ever in the tyre industry, Delticom targets 10 per cent revenue growth and increased its EBIT-margin outlook from 6 to 7 per cent. We think Delticom's eCommerce focus will lead to further market share gains and allows for annual revenue growth of 13.4 per cent and earnings per share growth of 18.4 per cent (estimated company annual growth rate from 2008-2011).”
The fact that the market has been so bad is the main reason the analysts were so positive towards Delticom. According to the analysts, retailers “operated with the lowest inventories ever this year,” which means there is plenty of room for an improvement in the company’s already good figures, should the market pick up. This is particular possible in Delti’s case as the company’s strong position in continental Europe (compared to other online tyre operations) means it stands to benefit from further positive drivers in restocking in the 2009 winter tyre season.
However, the analysts also warn that the main threat to the investability of the company is high inventory levels. “If the winter business develops below expectations, this might force Delticom to offer higher discounts. A fast/un-hedged USD appreciation could also negatively affect purchase prices.”