Magnera Corporation (MAGN): A Bull Case Theory

We came across a bullish thesis on Magnera Corporation (MAGN) on Substack by Phenom Capital. In this article, we will summarize the bulls’ thesis on MAGN. Magnera Corporation (MAGN)’s share was trading at $19.02 as of March 27^th.

Magnera Corp (MAGN) was recently formed through the merger of Berry Global’s spun-off HH&S division and Glatfelter Corporation, creating a company with significant synergies and recovery potential. Currently guiding for $455 million in EBITDA, Magnera is still emerging from cyclical lows caused by the post-pandemic demand surge and subsequent destocking. Historically, utilization rates ranged from 85–90%, but after bottoming in the low 70% range, they are now gradually recovering to the mid-70s. If both legacy entities return to their pre-pandemic EBITDA levels, the company could generate $490 million in EBITDA, with further upside to $557 million after expected synergies are realized.

Magnera operates with $2.085 billion in gross debt, structured across three tranches: $500 million at 4.75%, $800 million at 7.25% due in 2031, and $785 million at 9.25%, resulting in $154 million in annual interest expenses. The company’s current financial structure implies significant free cash flow (FCF) potential. With $455 million in EBITDA, $154 million in interest expenses, and $130 million in capex, the company is generating $171 million in free cash flow, reflecting a 26% levered FCF yield.

This high FCF yield, combined with EBITDA expansion from improved utilization and expected synergies, positions Magnera for a compelling revaluation. As utilization rates normalize and cost synergies materialize, the company’s ability to deleverage will become a key driver of stock price rerating.

Magnera Corporation (MAGN) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 47 hedge fund portfolios held MAGN at the end of the fourth quarter which was 16 in the previous quarter. While we acknowledge the risk and potential of MAGN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MAGN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.