Jupiterimages/Stockbyte via Getty Images

Jupiterimages/Stockbyte via Getty Images Liners For Pools

Hayward Holdings (NYSE:HAYW ) rose as much as 13% on Wednesday after analysts at Jefferies upgraded the maker of swimming-pool equipment to Buy from a previous investment rating of Hold. They said Hayward (HAYW) has the potential to boost profits after facing economic hurdles in 2023.

Hayward (HAYW) is a high-quality business with a large installed base and aftermarket exposure that should deliver double-digit earnings growth through the cycle,” Saree Boroditsky, analyst at Jefferies, said in a January 4 report. “While we see negative earnings revisions in the near term, the long-term earnings power supports a higher valuation.”

About 80% of pool equipment sales come from customers who already own a pool, and the average age of U.S. pools is about 23 years. Hayward (HAYW) is poised to benefit as customers spend on replacing and upgrading equipment such as water pumps, according to Jefferies. Hayward (HAYW) also is buying back stock, which supports the share price.

Jefferies raised its price target for Hayward (HAYW) to $15 a share from $9.50 a share, based on a multiple of 14 times estimated EBITDA for 2025 discounted at 10%.

“The company was a clear beneficiary of the stay-at-home trend, and we expect to see significant declines in 2023 from a weaker consumer backdrop and inventory destocking,” according to Jefferies. “That said, we believe the current valuation is attractive given the long-term growth algorithm and potential benefit from share repurchases.”

Outdoor Pool Liners Hayward's (HAYW) stock fell 60% in the 12-month period through January 3, compared with a 16% decline for the Standard & Poor's 400 midcap stock index (SP400).