Alstom shares gained over 6% on Monday morning on the Paris Bourse, posting the biggest rise on the SBF 120 index, in the wake of positive comments from Deutsche Bank, which believes that "the worst is over" for the rail equipment manufacturer.

This morning, the intermediary raised its recommendation on the train, metro and streetcar manufacturer's shares from "hold" to "buy", with a price target maintained at 17 euros.

In a research note, the analyst discusses the company's recently announced €2 billion debt reduction plan, and anticipates a limited capital increase of around €500 million.

"The dilutive effect of this capital raising project, as well as the risks of contract execution, are now well understood by the market, now that the stock has lost 54% in one year", Deutsche points out in the research note.

With Alstom scheduled to unveil details of its debt reduction efforts in May, the professional says it is considering a scenario of forced liquidations of short squeezes on the stock, currently one of the best-selling in Europe.

DB also sees potential for improvement in the company's profit margins and free cash flow (FCF), calculating that a 0.5-percentage-point increase in margins would have a positive impact of 90-100 million euros on FCF.

Alstom shares are currently up nearly 7%, by far the biggest gainer on the SBF 120 index and the second best performer on the pan-European STOXX 600 index.

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