DS Smith PLC (LSE:SMDS) rose 2.3% after analysts at Barclays upgraded the stock to ‘overweight’ from ‘equal weight’ and raised its price target.
The broker said DS Smith is one the cheapest stocks in global packaging currently and it expects a volume recovery to drive a multiple re-rating.
With inflation cooling down, Barclays expects volumes to pick up next year by around 3-5%.
It also suggested that if the company cut back on growth capex, free cash flow would be significantly ahead of dividends and then it could consider share repurchases, especially at the current depressed multiple.
“We believe DS Smith should cut capex to maintenance capex levels and hope that DS Smith doesn't engage in expensive M&A and instead focuses on optimising its portfolio and operations,” analysts at Barclays said.
The bank has increased its share price target to 360p from 310p.