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Investing.com -- Comet shares dropped 2.2% following a downgrade by UBS from Buy to Neutral, with analysts citing slowing growth prospects in the company’s semiconductor business.
UBS lowered its price target to CHF194, expressing concerns about weaker-than-expected demand improvements in Comet’s semiconductor-focused segment. The bank’s analysts noted that consumer spending uncertainty and reluctance from semiconductor equipment customers to commit to additional capital expenditures have limited the company’s growth potential.
The downgrade reflects UBS’s revised outlook for Comet, which now anticipates "material sales growth deceleration" in the company’s semiconductor business. This represents a significant shift from the bank’s previous investment thesis, which had been built on expectations of a stronger demand recovery and additional sales from Comet’s new RF generator product.
"We expect this to also limit the company’s operating leverage- and business mix-driven margin upside. Furthermore, using a reverse DCF (keeping all else constant) suggests that Comet’s current share price reflects much of our lowered estimates. Hence, we view the potential for upside and downside as balanced," UBS analysts stated.
The Swiss bank’s assessment indicates that Comet’s current share price appropriately reflects the risks and revised growth expectations, leading to the neutral stance. The stock movement suggests investors are adjusting their positions in response to the tempered outlook for the company’s near-term performance.
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