Shares of FARO Technologies (FARO) surged 5.25% in the pre-market session on Friday, following an analyst's price target upgrade that cited the company's improved profitability outlook.

Craig-Hallum analyst Greg Palm raised the firm's price target on FARO to $36 from $33 while maintaining a Buy rating. The analyst's move came after FARO updated its long-term, aspirational margin targets at a competitor conference this week. Specifically, FARO now expects to achieve an EBITDA margin of 20% at $400 million in revenue, up from the previous target of 15%.

Palm noted that given these new assumptions, Craig-Hallum is increasingly confident in FARO's ability to generate $100 million in EBITDA in the coming years, which would represent almost a threefold increase from the firm's fiscal 2024 estimate. The analyst's bullish stance reflects optimism around FARO's potential to deliver significant margin expansion and profitability improvements going forward.