Air Liquide Shares Decline After Downgrade

Shares of Air Liquide (OTC:AIQUY) fell on Thursday following Morgan Stanley’s downgrade to “underweight,” raising concerns about a potential cyclical slowdown in its core customer base.

At 8:20 AM (1220 GMT), Air Liquide traded 2.3% lower at €164.58. Morgan Stanley set a price target of €149 per share, citing limited upside after recent outperformance in European markets.

Despite executing well and capitalizing on the global energy transition, analysts warned about sustaining this level amid growing challenges, particularly from the refining, chemicals, and metals sectors.

These industries, which are vital to Air Liquide’s Large Industries business, are projected to reduce capital expenditure (CapEx) by about 1% over the next three years. This decrease impacts the company’s growth, relying on new onsite projects and customer base expansion.

Morgan Stanley emphasized that the current share price may not fully reflect anticipated challenges, especially the expected slowdown in capital investments. While Air Liquide is involved in decarbonization projects for long-term growth, a gap in growth could arise in the next couple of years.

Moreover, despite several new energy-related projects announced by Air Liquide, their earnings contribution will be delayed. Analysts believe valuations do not accurately consider this lag.

Another concern is the price ceiling in Air Liquide’s Industrial Merchant business due to recent consolidation, limiting further price increases. Although price declines are not expected, this indicates constrained margin growth and vulnerability to earnings downgrades.

Currently projected EBITDA growth for 2025 stands at a high 7.8%, which Morgan Stanley considers optimistic. The slower pace of new investment decisions might hinder future growth, particularly as CapEx from traditional customers flattens.

However, growth prospects in the electronics sector are anticipated to pick up in 2026 and 2027 due to U.S. onshoring programs and technological advancements. Yet, this increase in demand may not mitigate immediate challenges from falling CapEx in core markets.

Air Liquide continues focusing on energy transition as a critical growth driver, emphasizing hydrogen production and industrial decarbonization to capitalize on the shift towards cleaner energy. Analysts expect more substantial additions in projects to begin around 2027 and beyond.