Morgan Stanley Calls HONA Stock a Stealthy Value Play
Honeywell Aerospace stock (HONA) jumped nearly 9% after Morgan Stanley upgraded it to 'Overweight' from 'Equal Weight', citing a valuation that is too punitive.
The investment bank set a price target of $205, implying nearly 28% upside from Tuesday's close. This follows a significant decline in the stock over the past month, having fallen around 24%.
Morgan Stanley acknowledged lingering concerns about Honeywell Aerospace, including weaker revenue and earnings before interest and taxes (EBIT) growth compared to peers, limited margin expansion, and free cash flow conversion that trails peers.
The bank's fundamental issues have not disappeared, but it believes the valuation now compensates for these risks. 'HONA warrants a discount to peers, in our view, but not the ~35% discount reflected today,' Morgan Stanley said.