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On Thursday, Jefferies analyst Jacky He upgraded AAC Technologies Holdings Inc . (2018:HK) (OTC: OTC:AACAY) stock rating from Buy to Buy, increasing the price target to HK$60.00 from the previous HK$48.00. The upgrade reflects a positive outlook on the company’s position within the supply chain and its potential for growth despite a lackluster forecast for global smartphone sales this year. The market appears to share this optimism, with the stock delivering an impressive 146% return over the past year and currently trading near its 52-week high of $6.89.
AAC Technologies, known for its role in producing components for electronic devices, has been identified as favorably positioned by Jefferies. The firm has slightly raised its revenue and net profit forecasts for AAC Technologies for the years 2025 to 2027, now sitting 6% and 10% above consensus, respectively. This optimistic revision comes amid expectations of a challenging year for the global smartphone market. According to InvestingPro data, the company maintains a strong financial health score of "GOOD" and has demonstrated solid revenue growth of 9.86% in the last twelve months.
Despite broader market concerns, Jefferies notes that AAC’s large Android customers, Xiaomi (OTC:XIACF) and Huawei, continue to perform strongly among major original equipment manufacturers (OEMs). This performance could provide a buffer against the uncertainty of overall demand. Additionally, AAC’s capabilities in key components are expected to help the company capitalize on the trend towards artificial intelligence (AI) device innovation over the next one to three years. With the company’s next earnings report scheduled for March 20, 2025, InvestingPro subscribers can access detailed financial forecasts and additional insights to better evaluate the company’s growth trajectory.
The upgraded price target is based on a discounted cash flow (DCF) analysis, with a weighted average cost of capital (WACC) of 9.8% and a terminal growth rate of 5.0%. According to Jefferies, the new price target implies a price-to-earnings (P/E) ratio of 26 times AAC’s estimated 2025 earnings and a price-to-earnings growth (PEG) ratio of 1.5 times. This suggests a potential upside of 15% for the stock.
AAC Technologies’ current valuation stands at 23 times the estimated 2025 P/E and 19 times the estimated 2026 P/E, according to Jefferies’ analysis. The firm’s upgrade to a Buy rating and the new price target underscore a confidence in AAC’s growth prospects and its strategic positioning within the evolving tech industry.
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