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Investing.com - UBS upgraded CKD Corp (TYO:6407) from neutral to buy on Thursday, raising its price target by 63% to JPY3,220.00 from JPY1,980.00, citing attractive valuation and solid earnings prospects.
The Japanese automation components manufacturer is expected to benefit from a rebound in domestic sales of pneumatic components and fluid control components for semiconductors, according to UBS. The firm anticipates this recovery will be a key driver for CKD’s future performance.
UBS also highlighted the likelihood that CKD’s sales to growing Chinese semiconductor production equipment (SPE) companies will remain firm, providing another avenue for sustained revenue growth. This represents a significant opportunity in the expanding Chinese semiconductor market.
Margin improvement is expected as demand recovers, with UBS noting that CKD has already invested to expand production capacity. The firm believes these investments position the company to benefit from volume effects and productivity increases as market conditions improve.
UBS concluded that if earnings recover as expected, CKD stock should rise, particularly as the market currently harbors concerns about demand. The significant price target increase reflects UBS’s confidence in CKD’s growth trajectory and potential for share price appreciation.
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