On Wednesday, Deutsche Bank (ETR:DBKGn) adjusted its financial outlook on shares of ams OSRAM AG ( AMS (VIE:AMS2):SW) (OTC: AUKUF), a key player in the semiconductor industry. The firm's analyst reduced the price target on the company's shares to CHF10.00 from the previous CHF15.00, while still recommending a Buy rating for investors.
ams OSRAM, in its third-quarter report, disclosed a downturn in sales and profitability, particularly in its automotive segment. The company reported a 10% year-over-year decline in automotive revenue within its semiconductor operations for the third quarter of 2024. This drop is attributed to 'cyclical headwinds' impacting the industry.
The automotive business, especially the auto LED segment inherited from the old OSRAM, is a significant contributor to the company's earnings before interest, taxes, depreciation, and amortization (EBITDA).
This segment is believed to generate EBITDA margins between 30-35%, which is substantially higher than the company's average margin of 17%. Consequently, a sustained decrease in automotive sales could considerably affect the company's overall profitability.
The analyst from Deutsche Bank drew parallels to past performance, noting that ams OSRAM's EBITDA halved in the fiscal year 2019 due to challenges in the automotive sector, particularly with the Opto business unit.
With this historical context in mind, the analyst has adopted a cautious stance compared to the consensus, forecasting an adjusted EBITDA of €544 million for the year, which is expected to be roughly on par with the figures from 2024.
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