Deglobalization And Wireless Power Will Undermine Cable Demand

Key Takeaways

• Deglobalization, rising protectionism, and accelerating alternative technologies threaten Prysmian's global market expansion and long-term cable demand.
  
• Persistent cost inflation, execution risks, and reliance on core markets increase margin pressure and earnings vulnerability to market or technology disruptions.
  
• Strong demand, favorable regulation, technological leadership, strategic acquisitions, and a robust order backlog position Prysmian for sustained, profitable growth across key markets.

Catalysts

Produces, distributes, and sells power and telecom cables and systems, and related accessories under the Prysmian, Draka, and General Cable brands worldwide.

• The long-term risk of deglobalization and rising protectionism may disrupt Prysmian's global supply chains and restrict cross-border infrastructure projects, significantly limiting the company's international market expansion potential and putting future revenue growth at risk.
  
• The accelerating development of alternative technologies such as wireless power transmission could structurally reduce the need for traditional cable infrastructure, directly threatening Prysmian's addressable market, eroding its long-term revenue base and growth visibility.
  
• Persistent cost inflation in raw materials, energy, and labor across Europe and North America may outpace Prysmian's ability to raise prices, squeezing net margins over time and making earnings more volatile, especially as contracts become harder to renegotiate in weaker macroeconomic environments.
  
• Overreliance on core cable, energy, and telecom markets, with a slow pace of diversification, increases the risk that earnings will become highly vulnerable to downturns or disruptive innovation in these sectors, making long-term EPS growth targets difficult to sustain if end-market conditions deteriorate.
  
• Execution risks in increasingly complex, large-scale transmission and grid projects could result in cost overruns, project delays, and warranty claims, leading to ongoing gross margin pressure and greater volatility in reported earnings as the backlog of high-value projects grows and supply chain bottlenecks persist.

Prysmian Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Prysmian compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Prysmian's revenue will grow by 4.1% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 3.9% today to 4.6% in 3 years time.
• The bearish analysts expect earnings to reach €977.1 million (and earnings per share of €3.41) by about September 2028, up from €749.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 20.2x on those 2028 earnings, down from 30.5x today. This future PE is greater than the current PE for the GB Electrical industry at 16.7x.
• Analysts expect the number of shares outstanding to decline by 0.89% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.87%, as per the Simply Wall St company report.

Prysmian Future Earnings Per Share Growth

Risks

• Secular growth trends in data center construction, renewables grid expansions, and digital infrastructure are driving significant demand for Prysmian's products, which has resulted in strong organic growth across Power Grid, Transmission, and Digital Solutions businesses, and sets the stage for continued revenue growth in the coming years.
  
• Recent US tariff changes strongly favor local manufacturers like Prysmian by penalizing imported cables while leaving domestic production costs largely unaffected, creating a competitive advantage that can drive margin expansion and support top-line growth in the company's largest and fastest-growing market.
  
• The company's technological leadership and innovation (such as hollow-core fiber, fire-resistant and connectorized cables, and advanced recycling practices) position Prysmian at the forefront of high-value, specialized applications, allowing for premium pricing and improved profitability as customers increasingly demand next-generation and sustainable solutions.
  
• Prysmian's recent and ongoing strategic acquisitions (Encore Wire, Channell, Warren & Brown) have not only been quickly and successfully integrated but are delivering faster-than-expected synergies, boosting group EBITDA margins above prior guidance, and reinforcing stability and predictability in future earnings.
  
• There is strong visibility and security in future revenues due to a robust and healthy project backlog, long-term customer agreements in core power transmission markets, and the ongoing acceleration of grid and electrification investments in Europe and North America, all of which support multi-year gains in revenue, margin expansion, and growth in earnings per share.

Valuation

• The assumed bearish price target for Prysmian is €49.23, which represents two standard deviations below the consensus price target of €76.91. This valuation is based on what can be assumed as the expectations of Prysmian's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €102.0, and the most bearish reporting a price target of just €35.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €21.4 billion, earnings will come to €977.1 million, and it would be trading on a PE ratio of 20.2x, assuming you use a discount rate of 12.9%.
• Given the current share price of €79.8, the bearish analyst price target of €49.23 is 62.1% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.