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On Monday, Morgan Stanley adjusted its stance on M31 Technology Corp (6643:TT) shares, moving the rating from Overweight to Equalweight while significantly reducing the price target to NT$1,000 from the previous NT$1,830. The investment firm cited several reasons for the adjustment, including trimmed growth estimates and market performance expectations.
The firm's analysis now anticipates a lower intermediate growth rate for M31 Technology, adjusting it down from 19% to 16.7%. This revision is part of the rationale behind the new price target, which is expected to align the stock with a 67x multiple on the estimated 2025 earnings per share (EPS). This multiple sits between the historical average of 50x since 2020 and one standard deviation above that average, at 76x.
Despite the downgrade, Morgan Stanley recognized the company's potential in the intellectual property (IP) market over the long term. However, it also highlighted several short-term challenges that M31 Technology is facing. These include delays from key client Intel (NASDAQ:INTC), a sluggish recovery in the non-AI segment, and increasing competition in the sector.
The investment firm also noted that while research and development (R&D) investments are crucial for fabless semiconductor companies like M31 Technology, the outcomes of such investments may not be immediately apparent. The timeline for these R&D efforts to yield tangible results remains uncertain.
Morgan Stanley suggested that its outlook on M31 Technology could improve if certain conditions were met. These include a resurgence of Intel, a more robust recovery in the non-AI business, and additional project wins in the AI space, which could collectively mitigate the current uncertainties surrounding the company.
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