Bank of America sees accelerated revenue re-build in Aramark: time to buy?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jun 22, 2021
  • Bank of America updated its list of small and medium cap stocks to buy in 2021.
  • The bank added Aramark to the list, saying it sees the revenue re-build coming post-covid.
  • The food services company’s stock has pulled back recently. So, is it time to buy?

According to Bank of America ‘BofA’ analysts, Aramark Corp (NYSE:ARMK) will experience a revenue re-build in the post-covid period. Therefore, its equity research arm re-opened coverage with a bullish outlook and a price target of $44.00 per share, citing a post-pandemic change story. BofA said:

With the stock having underperformed meaningfully YTD and vaccine/re-opening progress gaining steam, we see this as a particularly attractive entry point ahead of what should be an accelerating revenue re-build in H2/21 (driven by sports attendance rising, in-person schooling this fall, and return to office.

Why buy Aramark stock in June 2021?

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BofA analysts are right to expect revenue rebuild for Aramark in the post-covid period. The food service company will benefit significantly from the re-opening of the US economy. 

The company’s most recent quarterly results showed it is on the right path after earnings beat expectations by 30%. Although analysts expected the bottom line to decline by more than 200% this year, the company could still outperform this expectation. Moreover, next year looks more promising, with earnings seen growing by a whopping 866%.

The expectations bed well with BofA’s comments. Although ARMK stock is up more than 68% over the last 12 months, it has pulled back more than 10% since 15th March. This pullback creates an exciting opportunity to invest in the company before the revenue re-build and earnings growth boost the price.

The stock trades at an attractive forward P/E ratio of 20.33 and a dividend yield of 1.17%.

Source – TradingView

Technical overview

Technically, ARMK stock appears to be trading within a consolidative triangle formation in the daily chart. The stock price recently bounced off the support level at $36.10 to surge above $37.74. However, it faces resistance from the 100-day MA. If it breaks through, there will be plenty of targets for the bulls.

Investors looking to ride the current rebound can target profits at approximately $39.22 and $40.75. The key support levels are $36.10 and $34.24.

Bottom line: Aramark looks like a compelling buy opportunity

ARMK stock looks attractive for investors targeting its revenue re-build and massive earnings growth in the post-covid period. The current rebound seems poised to continue before finally breaking above the 100-day MA. 

Now could be the perfect opportunity to buy Aramark shares before the price advances further. BofA’s current price target of $44.00 per share implies an upside potential of about 16.67%.

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