Investing.com — Shares of Dana Holding (NYSE: NYSE:DAN) climbed 4.5% after UBS analyst Joseph Spak upgraded the stock from Neutral to Buy, setting a price target of $18. The new target suggests a significant 49.3% upside from the previous closing price of $12.07.
The upgrade comes on the back of a strategic review by Dana Holding, where the company is considering the sale of its Off-Highway (OH) business, expected to be announced in the first half of 2025. UBS believes that the proceeds from this potential sale could be used to reduce debt, which would increase the value accruing to the equity holders.
Spak’s analysis indicates that Dana Holding could achieve approximately $200 million in cost savings by 2026, partly by shifting away from electric vehicles (EVs). This shift is projected to maintain or improve the company’s EBITDA margins, despite divesting a higher-margin business. The expected improvements in free cash flow and the application of a 4.3x EV/EBITDA multiple to the pro forma RemainCo EBITDA of $662 million, with a revised capital structure, support the $18 price target.
UBS’s assessment also includes a comparison to Dana’s closest peer, American Axle & Manufacturing Holdings Inc. (NYSE:AXL), which trades at approximately 3.9x its projected 2026 EV/EBITDA. If Dana Holding can sell its OH business for around 6x EBITDA, the current stock price is only valuing the remaining company at about 2.85x its estimated 2026 EV/EBITDA.
Spak’s statement emphasizes a balanced view of the company’s outlook: “To be clear, we still see some challenges with DAN’s business (especially near-term given end-markets/customers). However, the potential value unlock is too meaningful to ignore.” This quote underscores the potential for significant value creation despite the acknowledged near-term challenges faced by the company.
Investors appear to be responding to the positive analysis and the anticipated strategic moves by Dana Holding, as reflected in the stock’s positive performance during the trading session.
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