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On Monday, Citi analysts downgraded Makita Corp. shares from Buy to Neutral, adjusting the price target to ¥4,800 from the previous ¥5,500. The stock, currently trading at $27.98, has declined nearly 16% in the past week and is down 8.4% year-to-date, according to InvestingPro data. The downgrade follows President Trump’s April 2 announcement of new tariffs on products imported into the United States, which has led to a considerable sell-off in Japanese machinery stocks. With a market capitalization of approximately $7 billion and an overall "GOOD" Financial Health Score from InvestingPro, Makita maintains strong fundamentals despite market pressures.
Makita, which imports 60% of its products sold in the US from China, could see a financial impact of approximately ¥10 billion due to the tariffs, which include a significant 54% on the affected goods. Citi’s revised forecast for Makita’s fiscal year ending March 2026 reflects the potential repercussions of the tariffs on the company’s financial performance.
Despite Makita’s US sales accounting for only about 10% of its total sales, concerns are growing over a broader risk of recession and potential upward pressure on the yen. These economic factors contribute to the uncertainty surrounding Makita’s initial operating profit guidance for fiscal year 2026 and the possibility of the company delaying any increase in shareholder returns. Investors should note that Makita currently appears undervalued according to InvestingPro’s Fair Value analysis, with the company’s next earnings report scheduled for April 28, 2025.
Citi’s valuation of Makita shares is based on 20 times their fiscal year 2026 earnings per share forecast. With the revised price target and downgrade to Neutral, Citi signals caution to investors in the face of new tariff-induced challenges and broader economic concerns affecting the machinery sector. The company maintains strong fundamentals with a healthy current ratio of 5.41 and minimal debt-to-equity of 0.01, suggesting financial resilience during this challenging period.
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