Alstom - Positivity Continues After 1Q26, Further Upside Possible

Alstom has demonstrated a strong operational rebound, resolving legacy Bombardier contracts and enhancing visibility, underpinned by a robust €90B+ backlog and significant new orders, particularly within Germany and Europe. The company is well-positioned to capitalize on infrastructure investment trends, having materially decreased risks through improved contract structures despite ongoing high capital expenditures. An analyst maintains a Buy rating, citing a conservative €29/share price target and anticipating over 20% annualized upside, while noting the stock's valuation is no longer as compelling as before.

Analysis

Alstom is demonstrating a significant operational turnaround, primarily driven by the resolution of legacy issues tied to Bombardier contracts, which has substantially improved forward visibility. The company's fundamental strength is underscored by a robust backlog exceeding €90 billion, supported by strong recent order intake, particularly from Germany and other European markets. This positions Alstom favorably to capitalize on secular infrastructure investment trends across the continent. While ongoing high capital expenditures remain a factor, management has reportedly mitigated future earnings volatility by enhancing contract structures, leading to a material decrease in overall risk. The analyst's maintained "Buy" rating and a conservative €29/share price target suggest a potential annualized upside of over 20%, although it is noted that the stock's valuation is no longer as compelling as it was following its initial dip.

Key Decisions for Investors

• Investors may consider the 'Buy' rating and 20%+ projected upside as a strong positive signal, but should note the stock is no longer considered cheap, warranting a careful assessment of the entry point relative to its recent price appreciation.
• Closely monitor Alstom's execution on its €90B+ backlog and its management of high capital expenditures, as the ability to convert orders into profitable cash flow is critical to validating the company's improved risk profile.
• Factor in the company's significant leverage to European infrastructure spending, which acts as a major long-term growth driver but also exposes the investment to regional economic cycles and policy shifts.