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Investing.com -- Jefferies has downgraded its rating on Raspberry Pi Holdings PLC, shifting to a "hold" from a "buy" rating, citing full valuation concerns and ongoing uncertainty in the market, in a note dated Wednesday.
Despite the company’s strong positioning in edge AI and semiconductors, the analysts note that near-term visibility remains weak as inventory destocking continues to impact sales.
Raspberry Pi, widely recognized for its single-board computers, has been experiencing a prolonged inventory correction in the industrial IoT segment.
Jefferies had initially anticipated that destocking would subside by the third quarter of 2024, but the trend has persisted into early 2025.
This prolonged adjustment has prompted a downward revision of the brokerage’s revenue estimates for 2024, cutting projections to $260 million from the previously forecasted $282 million.
A transitionary year is expected in 2025, with stronger growth potential only materializing in 2026 when edge AI applications begin to make a contribution to sales.
Jefferies acknowledges the company’s unique positioning in the market, particularly in its ability to bridge hardware, software, and semiconductor capabilities.
Raspberry Pi has already established a foothold in AI-related applications by integrating accelerators such as the Hailo AI chip while supporting popular frameworks like TensorFlow and OpenCV.
The analysts expect that from 2026 onward, edge AI will emerge as a key driver of revenue growth.
In response to updated valuations, Jefferies has raised its price target for Raspberry Pi to 770p from the previous 448p, reflecting adjustments in sales growth expectations and a higher assumed terminal growth rate.
However, the analysts emphasize that current valuation multiples are already elevated, which limits further upside in the short term.
The stock is currently trading at an FY26 P/E ratio of approximately 60x and an EV/EBITDA multiple of 36x, numbers that, according to Jefferies, already factor in much of the anticipated growth.
The brokerage also notes that macroeconomic factors, including potential trade restrictions and broader industrial demand cycles, could influence Raspberry Pi’s recovery trajectory.
While the long-term outlook remains positive, particularly with the expansion of its semiconductor business, Jefferies believes investors should wait for clearer signs of a rebound before re-engaging aggressively with the stock.
Shares of the company were down 1.6% at 08:45 ET (13:45 GMT).