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On Tuesday, BofA Securities issued a new rating for ASUSTeK Computer Inc (2357:TT) (OTC: AKCPF), downgrading the company’s stock from Buy to Neutral and adjusting the price target from NT$715.00 to NT$660.00. The downgrade by analyst Robert Cheng reflects concerns over increased costs in the U.S. due to a 20% tariff hike implemented by the Trump administration, potential soft demand resulting from these tariffs being passed on to customers, a deceleration in server growth for the year 2025, and a high valuation compared to its peers.
The report from BofA Securities highlights several factors influencing the downgrade. The analyst pointed to higher costs in the U.S. following the tariff increase, which could lead to softer demand if the company decides to transfer these additional costs to its customers. Furthermore, slower server growth is anticipated in 2025, which is another contributing factor to the more cautious outlook on ASUSTeK’s stock.
The firm also adjusted its earnings estimates for ASUSTeK for the years 2025 to 2027, reducing them by 5-6% to account for the anticipated headwinds. This revision led to the decrease in the price target, which is now set at 16 times the projected earnings per share (EPS) for the second quarter of 2025 to the first quarter of 2026, down from the previous multiple of 16.5.
Despite the downgrade, BofA Securities acknowledges that ASUSTeK may still experience positive momentum in its gaming business, driven by Nvidia (NASDAQ:NVDA)’s RTX 50 series GPUs starting in the second quarter of 2025. The firm also notes that ASUSTeK is expected to have a higher server sales mix, representing a low teens percentage of its 2024 sales, compared to its PC peers. Additionally, there may be potential for earnings upside from the reversal of bad debt from an Indian client in the first half of 2025.
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