Deutsche Bank Defends TransDigm, Calls Substance Of Critiques 'Minimal'

Shares of TransDigm Group Incorporated TDG have been under pressure due to several short-seller reports, creating upside opportunity.

Deutsche Bank’s Myles Walton maintained a Buy rating on the company, with a price target of $305.

Concerns Abound

Concerns around TransDigm have “evolved from initial questions on acquisition policy and compliance to the use of distributors to questions of related party interests in M&A transactions for sales tactics,” Walton commented. He added that the “substance of the critiques” remained “minimal” and doesn't change “our view of the overall business model or future behavior of the company.”

Concerns related to TransDigm’s relationship with the government and the role of distributors in the market have been addressed “a decade ago” and there seemed to be “no incremental information being offered,” the analyst mentioned.

Related Link: Canaccord Says Citron's Short Report On TransDigm Creates Buying Opportunity

Concerns around there being related party issues on acquisitions that were not fully known.

“On this front, there have been related party disclosures in the past where necessary and the relationship with private equity (including two that capitalized the company in the first place) have been long understood,” Walton wrote.

While it’s difficult to predict when the pressure on the company’s shares would ease, positive business results would likely “provide strong counterpoints,” the analyst said.