On Wednesday, Kepler Cheuvreux analysts revised their stance on u-blox AG (UBXN:SW), a Swiss provider of wireless and positioning modules and chips, downgrading the stock from Buy to Hold. Accompanying the downgrade was a reduction in the price target to CHF77.00 from the previous CHF80.00. The adjustment follows u-blox's announcement of its decision to terminate its Cellular venture, which had been an area of investment for over a decade, with nearly half a billion CHF funneled into the venture.
The discontinuation of the Cellular business by u-blox was described as a strategic move to curb losses and concentrate on more profitable segments. Despite attempts to salvage value through the sale of the venture, no effective options were found, leading to the decision to progressively close the operation and manage the ensuing profit and loss impact.
Kepler Cheuvreux anticipates that this strategic shift will enable u-blox to achieve significant EBIT profitability by the fiscal year 2026. However, it also signifies the cessation of any potential for value creation from the Cellular division. The analysts have therefore revised their estimates, factoring in operational expenditure reductions and one-time cash impacts.
The firm's decision to wind down its Cellular business comes after unsuccessful efforts to find a buyer or alternative means to derive value from the venture. This move is expected to streamline u-blox's operations and refocus its resources on more lucrative areas.
In light of these developments, Kepler Cheuvreux has updated its valuation model for u-blox, leading to the lowered price target and rating change. The new target reflects the analysts' adjusted outlook on the company's financial performance following the termination of the Cellular business.
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