Rollins recent selloff creates buying opportunity, analysts say

Rollins Inc.'s (NYSE:ROL) 8.4% sell on Thursday in reaction to pest control competitor Rentokil's (RTO) Q3 results represents a buying opportunity, according to analysts.

"We find ROL especially attractive with shares at 32x ’24 P/E (vs. 48x 5yr avg.) following a secondary offering from the Rollins family and RTO’s miss," BofA analyst Jason Haas, who has a buy rating on Rollings, wrote in a note on Friday. "The Street has already been modeling a deceleration in organic revenue growth to roughly 6% in 2024 and beyond."

BofA's Haas continues to see tailwinds for Rollins (ROL) due to Southern migration, climate change, increased pest resiliency, and a shift to do-it-yourself. Haas is also bullish on ROL's new management's ability to drive higher margins through price increases and internal improvements.

Reflecting Rentokil's (RTO) Q3 earnings miss, Hass reduced the Rollins (ROL) price target to $42.30 from $49.

RBC analyst Ashish Sabadra, who has an outperform rating and a $52 price target on Rollins (ROL), also agreed that the Rollins share price drop creates a buying opportunity.

"We believe ROL’s stock selloff (down 8.35% vs. SPX down 85 bps) on weak RTO results has created an attractive medium-to-long-term buying opportunity," Sabadra wrote in a note on Thursday. "Website data traffic suggest stable 3Q results, despite the weak September, and management commentary intra-quarter was positive. Although it’s difficult to forecast quarterly revenue growth, secular trends for pest control services and strong execution should deliver stable revenue growth over the medium term."

Stifel analyst Michael Hoffman on Friday also raised his rating on Rollins (ROL) to buy from hold.

Investors are scheduled to learn more about Rollins(ROL) results when it reports Q3 earnings on Wednesday and hosts a conference call on Thursday.