On Thursday, Jefferies adjusted its stance on CKD Corp (6407:JP), changing the rating from Buy to Hold, while increasing the price target to JPY2,600.00, up from JPY2,300.00. The revision comes ahead of the company's third-quarter results announcement, where another downward revision to CKD's full-year March 2024 operating profit guidance is anticipated.
The adjustment by Jefferies reflects concerns over potential downside to CKD's earnings forecast, which was made three months prior. This sentiment is based on recent comments from other leading factory automation equipment suppliers that suggest a less optimistic outlook for CKD's financial performance.
The new price target of JPY2,600.00, despite being higher than the previous target, is not considered to offer sufficient upside when compared to CKD's last closing price. This assessment is made even after applying a historical peak multiple to the firm's new full-year March 2025 profit forecast.
In their commentary, Jefferies indicated that the updated price target and the downgrade to Hold reflect a cautious stance on the stock's potential growth. The firm's analysis suggests that the current market price does not warrant a Buy rating given the expected earnings revision and the historical valuation multiples.
Investors and market watchers will be looking closely at CKD Corp's upcoming quarterly results to see if the company's performance aligns with Jefferies' expectations and to gauge the potential impact on the stock's future trajectory.
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