Craig-Hallum downgrades Shimmick to Hold, lowers price target to $4

As previously reported, Craig-Hallum analyst Aaron Spychalla downgraded Shimmick to Hold from Buy with a price target of $4, down from $10. The firm notes Shimmick’s Q1 results missed across the Board as it continues to be impacted by a slower ramp in new project activity, as well as cost overruns and increased legal fees to pursue contract modifications and recoveries on legacy projects, with 2024 margin guidance now expected to be at the low-end as a result. Backlog declined again quarter-over-quarter, though optimism still remains on a pick-up in activity in the second half of the year, Craig-Hallum adds. Given Q1 performance, Shimmick also tripped a covenant on its revolver and is working to get a waiver, with its 10-Q delayed as a result, and $40M of non-core asset sales expected to close during Q2 to help shore up the balance sheet, says the firm.