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On Tuesday, BofA Securities issued a downgrade for Vanguard International Semi (5347:TT) stock, adjusting the rating from Neutral to Underperform. Accompanying the downgrade, the firm also reduced the price target from NT$105.00 to NT$85.00. The revision reflects concerns over the company’s earnings growth outlook, which has led to a reassessment of expected performance.
The downgrade was influenced by BofA Securities’ revised earnings per share (EPS) estimates for Vanguard International Semi for the years 2025-26. The firm’s analysts have reduced EPS projections by 1-15%, citing increased operational expenses and financing costs. These are expected to arise from the introduction of a new 12-inch fabrication plant, which is anticipated to impact the company’s financials.
Vanguard International Semi’s dividend per share (DPS) is another area of concern for BofA Securities, as it is highly valued by investors. The analysts at BofA Securities anticipate limited potential for an increase in DPS due to slower earnings growth projected for 2024-26, with an estimated EPS of approximately NT$5 for the years 2025-26.
The analysts also noted that the new 12-inch fab, scheduled to begin operations in 2027, is likely to have a significant impact on the company’s margins and bottom line due to associated depreciation. This factor contributed to the decision to lower the price-to-earnings (P/E) multiple from 20x to 18x for the period from the second quarter of 2025 to the first quarter of 2026, which forms the basis for the new price target.
Vanguard International Semi has not made any public statements in response to the rating downgrade and price target adjustment by BofA Securities as of today. Investors holding shares of Vanguard International Semi will be monitoring the company’s performance closely, particularly in relation to the concerns raised by BofA Securities regarding the new fab and its financial implications.
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