On Friday, Citi updated its outlook on Siltronic AG (WAF:GR) (OTC: SSLLF), increasing the price target to €100.00, up from the previous €95.00. The firm reiterated its Buy rating on the stock, following Siltronic's second-quarter financial results, which exceeded market expectations.
Siltronic's sales and EBITDA for the second quarter of 2024 surpassed forecasts by 6% and 32%, respectively. The company's performance indicates a positive shift, despite ongoing concerns over potential order delays due to customers working through high wafer inventories.
Citi's analysis suggests that the semiconductor industry may be nearing the lowest point of its current cycle. Factors contributing to this assessment include diminishing wafer inventories, chip stockpiles reaching more typical levels, and an uptick in end-user demand. These elements are expected to drive a robust cyclical recovery into the calendar year 2025.
The revised price target reflects Citi's confidence in Siltronic's valuation at this point in the cycle. The firm's assessment points to an "attractive asymmetrical payoff," where the potential for stock price appreciation significantly outweighs the risk of decline. This optimistic stance is underpinned by the maintained valuation multiple of approximately 6 times the forecasted fiscal year 2026 enterprise value to EBITDA.
Citi's updated price target and sustained Buy rating on Siltronic AG are based on the company's recent financial achievements and the expectation of a strong recovery in the semiconductor sector, which could commence as early as next year.
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