Bullish Analyst Predicts Advanced Drainage Systems' Stock To Soar 30% Despite Construction Cycle Risk

Oppenheimer analyst Bryan F. Blair initiated coverage on Advanced Drainage Systems Inc WMS with Outperform rating at a price target of $108.
The analyst believes the company will continue strong market outgrowth, attractive margins and return generation going forward.
Blair notes WMS has outperformed end-market growth in past 12 years, with 10% growth in non-residential business and 6% in the residential business.
The analyst is bullish on WMS' vast product portfolio, scale, efficient resource support (including a company-owned fleet of 700 trucks and 1,250 trailers), and persisted material conversion of stormwater and septic systems.
Blair expects volumes to remain pressured due to a decline in construction activity and continued weakness across non-residential and residential markets. Also, he sees the company's inability to maintain favorable price/cost as a matter of concern in the near term.
The analyst projects EBITDA of $872 million in 2023, $822 million in 2024 and $875 million in 2025.
Price Action: WMS shares are trading higher by 1.73% at $83.62 on the last check Wednesday.