On Monday, financial firm Goldman Sachs adjusted its stance on Obic Co Ltd. (4684:JP) (OTC: OBIIF), changing the stock's rating from Buy to Neutral. This alteration comes despite an increase in the price target, now set at JPY25,600.00, up from the previous JPY23,000.00.
The decision for the downgrade was influenced by a detailed review of Obic's first-quarter results for the fiscal year ending March 2025, which prompted a slight revision in operating profit forecasts for FY3/25 and FY3/26. The anticipated reduction in profits, by -0.5% and -0.3% respectively, is primarily due to unexpected rises in software procurement expenses within the system support services sector.
Concurrently, Goldman Sachs expressed a modestly improved medium-term outlook for Obic based on an increased demand from large enterprises. This factor contributed to the upward revision of the price target. Additionally, the firm considered a reduced weighted average cost of capital (WACC), which decreased to 5.4% from the earlier 6.0% due to a decline in the beta coefficient.
Despite the raised price target, the investment firm has shifted its recommendation to Neutral from Buy. The rationale behind this change in rating is the belief that the current share price of Obic reflects most of the potential gains, limiting the upside for investors.
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