On Tuesday, UBS analyst Madeleine Jenkins initiated coverage on SUSS MicroTec SE (SMHN:GR) with a Sell rating and a price target of EUR40.30.
Jenkins provided an outlook on the company, noting that despite SUSS MicroTec’s significant growth in 2024, driven by high-bandwidth memory (HBM) and artificial intelligence (AI) related demand which led to a 34% increase in sales and a doubling of its share price, expectations for 2025 are more conservative.
Jenkins anticipates that 2025 will be a transitional year for the company, with the demand for HBM and China tools normalizing. The analyst’s projections are cautious compared to the consensus, as she expects a 7% year-over-year revenue decline versus the consensus estimate of an 11% increase. Moreover, Jenkins forecasts an EBIT margin of 15%, slightly lower than the consensus estimate of 16%.
The UBS analyst used a three-year reverse discounted cash flow (DCF) model to underpin the price target. Based on this model, the current share price suggests a revenue compound annual growth rate (CAGR) of 9% from 2024 to 2027, which contrasts with UBS’s estimate of a -1% revenue CAGR.
Jenkins’ analysis indicates that the market’s expectations may be overly optimistic given the forecasted normalization of demand in the company’s key markets. The UBS price target of EUR40.30 reflects these concerns and the anticipated shift in the company’s growth trajectory.
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