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Investing.com - Bernstein SocGen Group downgraded Square Enix Holdings (OTC:SQNNY) from Market Perform to Underperform, while adjusting its price target to JPY2,130.00 from JPY6,400.00.
The significant price target reduction primarily reflects Square Enix’s recent 3-for-1 stock split, while maintaining the same 21x FY3/27E PE multiple in Bernstein’s valuation model.
Bernstein cited ongoing challenges with Square Enix’s flagship game Final Fantasy XIV, which "continues to struggle," alongside difficulties in the company’s mobile games business.
The research firm expressed skepticism about the potential impact of activist investors, stating it "continues to struggle to see how the activist investor can effect positive operational change" at the Japanese game developer.
Bernstein also noted that the reported $50 billion deal for Electronic Arts, "implying low-20x forward PE multiples," suggests that potential buyers who might have considered Square Enix "will probably be otherwise engaged for a period of time" and "might not be as price (or quality) insensitive as hoped."
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