On Wednesday, Berenberg changed its rating on Smith & Nephew PLC (LON:SN:LN) (NYSE: SNN) shares, moving from a Buy to a Hold. Accompanying this downgrade, the firm also adjusted its price target to £10.50, a decrease from the previous £14.50. This decision followed Smith & Nephew's release of a discouraging third-quarter trading report last week.
The report highlighted that although there was an uptick in the growth of the US Orthopaedics business during the third quarter, performance still fell behind that of competitors. Moreover, the company is facing increased difficulties in China, which have prompted downgrades in its guidance for the years 2024E and 2025E.
The analyst from Berenberg expressed concerns about the prospects of Smith & Nephew's financial improvement over the coming year. More than two years since the initiation of the company's turnaround plan, the slow progress raises doubts about the potential impact of management's 12-point strategy in the medium term.
Smith & Nephew has been working on a recovery strategy, but the recent trading update suggests that the pace of recovery is not meeting expectations. The analyst's statement reflects uncertainty about the company's ability to overcome current challenges and improve its financial performance.
As a result of these developments, Berenberg's revised position on Smith & Nephew now suggests a more cautious stance on the stock's outlook. The reduction in the price target to £10.50 from £14.50 mirrors the firm's reassessment of the company's value in light of the aforementioned issues.
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