One analyst thinks this stock is a buy with or without a buyout proposal.
Investors have sent shares of International Paper (IP 6.06%) higher in recent weeks on reports that the company has attracted the attention of a buyer. At least one Wall Street analyst sees reason to give the stock a look regardless of the merger and acquisition talk.
Shares traded up 6% as of 2:30 p.m. ET on Thursday after the company was upgraded at Jefferies Financial Group (JEF -1.78%).
There’s more than just a possible merger here
International Paper is a global leader in the paper and packaging industry, a sector that has been rocked by consolidation in recent years. The company has not sat on the sidelines and is looking to buy British paper supplier DS Smith. It is also reportedly a potential target for Brazil’s Suzano.
Jefferies analyst Philip Ng sees a lot of ways for International Paper to win. The analyst upgraded the stock to buy from hold and boosted his price target to $57 from $38. Ng says he sees “multiple levers” to unlock shareholder value, including new CEO Andrew Silvernail’s focus on value instead of volumes in sales, as well as increasing scale in Europe and refinements to the company’s portfolio.
The stock has been largely flat for the last decade, but Ng believes Silvernail is “an agent of change” with a strong track record of producing results.
Is International Paper stock a buy?
Shares of International Paper are up 26% in just the last month, but as Ng notes, even with those gains the stock is still down slightly compared to where it traded in 2014.
It is usually unwise to follow momentum traders into a potential buyout target, especially in a political climate that is hostile to foreign bidders for U.S. manufacturing titans. But Ng is offering a rosy outlook regardless of whether Suzano or someone else comes calling.
There is still a lot that needs to go right from here. The added scale in Europe assumes the DS Smith deal will get done, and at least part of the analyst’s call is a belief that the cycle is turning in International Paper’s favor. If Suzano should walk away, the stock would likely trade lower.
But for those looking to get in early on a potential turnaround story and who don’t mind the added volatility that comes with deal talk, it might be a good time to give International Paper a look.
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group. The Motley Fool recommends DS Smith. The Motley Fool has a disclosure policy.