Bullish indicating open at $55-$60, IPO prices at $37
On Tuesday, BofA Securities adjusted its stance on WT Microelectronics (3036:TT), shifting the stock rating from Buy to Neutral and reducing the price target from NT$115.00, down from the previous NT$140.00. The change in valuation reflects a more conservative earnings outlook for the technology firm.
The revision by BofA Securities comes as the analyst predicts a tempered earnings growth trajectory for WT Microelectronics. The firm’s price objective is now anchored to a 10x price-to-earnings ratio, a decrease from the prior 11x. This adjustment is due to expectations of a slower revenue increase and a less robust gross margin profile, which could impact the company’s operating leverage.
BofA Securities has also revised its earnings per share estimates for WT Microelectronics for the years 2025-26, reducing them by 16-20%. This decision is based on the anticipated softer revenue growth and the company’s gross margin outlook. Despite these changes, the analyst expects WT Microelectronics to maintain a compound annual growth rate (CAGR) of over 30% in earnings from 2024 to 2027.
The report also notes that while there may be limited potential for WT Microelectronics to increase its payout ratio due to significant debt and associated interest expenses, the firm’s valuation should remain supported. The analyst suggests that despite the near-term financial costs, the expected earnings growth should provide a floor for the stock’s valuation.
Investors in WT Microelectronics will be watching closely as the company navigates the challenges outlined by BofA Securities, balancing debt management with the pursuit of sustained earnings growth over the coming years.
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