International Paper Company (IP): A Bear Case Theory

We came crossed a bearish thesis connected International Paper Company connected Valueinvestorsclub.com by Sarelam34. In this article, we volition summarize the bulls’ thesis connected IP. International Paper Company's stock was trading astatine $39.48 arsenic of November 28th. IP’s trailing and guardant P/E were 38.15 and 17.95 respectively according to Yahoo Finance.

Photo by Marcell Viragh connected Unsplash

International Paper Company produces and sells renewable fiber-based packaging and pulp products successful North America, Latin America, Europe, and North Africa. IP is trading astatine a historically affluent valuation, with a 2025E EBITDA aggregate of 11.2x—nearly three times its humanities mean and 50% higher than Smurfit WestRock, contempt weaker margins and higher leverage.

Bulls anchor their thesis connected caller CEO Andy Silvernail, highlighting his operational track record at IDEX, a refocused superior allocation strategy, and the perceived pricing powerfulness of a concentrated North American containerboard industry.

Silvernail’s 2027 targets envision EBITDA of $5.5–$6.0 cardinal and a adjacent tripling of escaped currency flow, driven by some synergies from the DS Smith acquisition and above-market measurement growth. However, these projections look terrible economical and structural headwinds. U.S. corrugated container shipments person been stagnant for 3 decades, and IP’s marketplace stock has declined from 35% successful 2013 to 28% successful 2024. The DS Smith acquisition, a $10 cardinal cross-border woody pursued amid a bidding war, burdens IP with precocious leverage and analyzable integration, constraining further M&A. Synergies are uncertain, arsenic humanities precedent successful containerboard suggests gains are often offset by competitory pressures.

IP’s escaped currency travel past further undermines optimism. Excluding acquisitions, FCF has averaged $0.7 cardinal annually implicit the past 3 years, yet the company maintains a $1 cardinal dividend, requiring borrowing successful 2025. Aggressive 2027 targets trust on favorable pricing assumptions and unprecedented measurement growth, some inconsistent with semipermanent trends.

Given realistic multiples and base-line earnings, IP shares could commercialized 40–50% lower, from $25–$30, portion upside to $60 reflects already inflated expectations. Market absorption whitethorn displacement from the “Silvernail era” communicative to dividend sustainability and operational reality, particularly if economical conditions deteriorate oregon EBITDA underperforms. Catalysts include likely Q3–Q4 2025 net disappointments, prompting revisions for 2026 and skepticism toward 2027 guidance.