On Tuesday, Kepler Cheuvreux raised its rating on VAT Group AG (VACN:SW) stock to Buy from Hold, despite lowering the price target to CHF 460.00 from CHF 490.00. The adjustment comes after a reassessment of market expectations for 2025E Wafer Fabrication Equipment (WFE) capital expenditures, which have recently decreased due to a mix of industry developments.
The firm's analyst cited VAT Group's third-quarter results and order intake as somewhat subdued, leading to a reduction in EBITDA forecasts for 2024, 2025, and 2026 by 7%, 10%, and 9%, respectively. Despite the downward revisions, the analyst maintains a positive outlook on the company's medium-term structural prospects and the ongoing recovery of the underlying industry.
The report indicates that the ramp-up in WFE is anticipated to accelerate as 2025 progresses and into 2026. The analyst also noted the potential for near-term market fluctuations, with key industry players such as Applied Materials (NASDAQ:AMAT) and Tokyo Electron set to report their third-quarter figures, and ASML (AS:ASML)'s investor day approaching within the next two weeks.
The rationale behind the improved rating reflects the belief that the stock's valuation has become more attractive following a roughly 30% decline from its peak in July. Furthermore, the analyst suggests that with estimate revisions potentially nearing completion and investors beginning to focus on the 2025/26 outlook, the risk/reward profile for VAT Group shares has become favorable.
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