Deutsche Bank downgraded its stance on shares of equipment rental firm Ashtead to ‘hold’ from ‘buy’ but lifted the price target to 5,108p from 4,750p as it argued the valuation is outstripping returns.
The bank said the investment case around Ashtead remains sound, although this cycle is likely to be the last of the ‘easy wins’ with regard to taking market share within a market exhibiting secular growth.
“Rental penetration remains lower in the USA than elsewhere, helping to drive the underlying market,” DB said. “We believe there are around 10 years of further growth before the USA rental market starts to reach maturity. The level of further US infrastructure spending remains an unknown for the mid-term.”
Deutsche added that Ashtead remains an asset-based business and said it see returns remaining within the historic range, particularly as replacement capex rises.
At 0925 BST, the shares were down 1.8% at 4,975p.
