On Thursday, Morgan Stanley adjusted its stance on shares of POSCO (NYSE:PKX) Future M Co Ltd (003670:KS), downgrading the stock from Overweight to Equalweight and significantly reducing the price target to KRW220,000 from the previous KRW360,000. The firm's analyst cited a sequence of guidance revisions and a less optimistic industry outlook as reasons for the more guarded perspective.
According to Morgan Stanley, POSCO Future M's commitment to increasing its cathode production capacity by over 20% year-over-year is at odds with the revised revenue guidance from LG Energy Solutions (373220.KS), which anticipates a 20% year-over-year decrease.
The analyst also pointed out the increased inventory levels at General Motors (NYSE:NYSE:GM) as a potential issue that could impact POSCO Future M, even if the company achieves its production targets.
The analyst's assessment further noted that despite a year-to-date share price decline of 37% for POSCO Future M, in contrast to a 2% increase in the KOSPI index, the next twelve months' price-to-earnings (P/E) multiples still appear demanding.
The revised model from Morgan Stanley, which prompted the reduction in price target to KRW220,000, reflects these concerns and the challenges that may lie ahead for the company.
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