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On Monday, Jefferies updated its outlook on FANUC Corp (6954:JP) (OTC: FANUY (OTC:FANUY)), increasing the price target to JPY4,400 from the previous JPY3,600, while maintaining a Hold rating on the stock. The adjustment follows a quarter where FANUC's orders exceeded expectations, driven primarily by one-time large orders for industrial robots and robodrills. According to InvestingPro data, the stock has shown strong momentum with an 18.5% return year-to-date, though it currently trades at a relatively high P/E ratio of 31.8x.
The analyst at Jefferies noted that while the third-quarter performance for the fiscal year ending March 2025 was strong, it poses a challenge for the company in achieving year-over-year order growth in the following fiscal year due to the exceptional nature of the orders. The new price target reflects a more optimistic market sentiment regarding the overall order environment for FANUC. InvestingPro analysis indicates the stock is currently trading above its Fair Value, with technical indicators suggesting overbought conditions.
Despite the positive adjustment in FANUC's price target, Jefferies expressed caution, pointing out that the recent momentum in the company's share price might face risks. The analyst highlighted the lack of evidence that FANUC will deliver profits beyond what the market currently anticipates, which could potentially dampen investor enthusiasm in the near term.
FANUC, known for its expertise in automation and robotics, has been closely watched by investors seeking to gauge the health of the industrial sector. The company's performance is often seen as an indicator of broader market demand for automation solutions.
The revised price target by Jefferies aims to account for the current market dynamics while also considering the potential challenges that FANUC may encounter in maintaining its growth trajectory. Investors and market observers will likely continue to monitor the company's performance and market conditions to assess the viability of the new price target.
In other recent news, FANUC Corp has been the recipient of an upgraded stock rating from Bernstein SocGen Group, moving from Market Perform to Outperform. This shift in stance comes in the wake of two successive quarters of new order growth for the industrial automation giant. FANUC's recent performance has been closely tied to the global Factory Automation (FA) cycle indicator, a factor that analysts at Bernstein, led by Jay Huang, believe will continue to drive the company's revenue and order growth.
Recent developments indicate that FANUC, which posted a revenue of $5.46 billion and an EBITDA of $1.39 billion in the last twelve months, is preparing for its next earnings report on January 27. Bernstein anticipates a broad-based recovery in the sector, forecasting an acceleration in FANUC's top-line growth to 15% in FY3/26, up from a 2% growth in FY3/25.
Previously, concerns about FANUC's margins had slowed Bernstein's decision to upgrade the stock. However, with peak inventory levels and expected production ramp-up, these concerns are being eased. Bernstein's analysis suggests that the cyclical FA recovery is typically stronger than that of the robotics sector, which should bode well for FANUC's financial performance. The company, known for its strong liquidity and a history of consistent dividends, appears well-positioned for the anticipated acceleration in the FA cycle.
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