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On Tuesday, BofA Securities analyst Takashi Enomoto upgraded Furukawa Electric Co (5801:JP) from Neutral to Buy, setting a new price target of JPY8,500, an increase from the previous JPY7,000 target. The upgrade reflects a positive outlook for the company’s future earnings, driven by growth in key business areas.
Enomoto’s optimism is rooted in the anticipated recovery of US telecom investment, which is expected to benefit Furukawa Electric’s US optical cable business. Additionally, the company’s involvement in the production of electronic materials and components for artificial intelligence (AI) servers, such as hard-disk blanks and thermal products, is seen as a promising area for growth.
The revised price objective is based on a price-to-earnings (P/E) ratio of 19.0x, a slight increase from the previous 18.5x, applied to the firm’s forecasted earnings per share (EPS) for the fiscal year ending March 2026. This adjustment in the P/E ratio reflects the analyst’s confidence in the high growth potential of AI server-related products.
Enomoto’s analysis suggests that the valuation range for Furukawa Electric is justifiable, especially when considering the P/E range of 9-17.5x observed during the last industry recovery period between 2016 and 2017. The company’s advancements in AI server-related products are a key factor in this positive reassessment.
The upgrade from BofA Securities indicates a strong belief in Furukawa Electric’s ability to capitalize on current market opportunities and expand its presence in the high-growth sectors of optical cable and AI server components. The new price target of JPY8,500 represents a significant vote of confidence in the company’s strategic direction and future earnings potential.
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