China smartphone shipments slumped in June on inventory overhang: Jefferies
Investing.com -- Siltronic shares slipped nearly 1% on Monday following a downgrade by Jefferies, which cited a prolonged industry downturn and limited short-term upside.
The brokerage cut its rating on the wafer manufacturer to Hold from Buy, pointing to persistent challenges in the semiconductor supply chain and a continued drag on free cash flow.
Jefferies highlighted that despite moderate growth in wafer demand across key end markets, shipments are expected to remain flat.
The brokerage pointed to ongoing destocking in the sector, particularly in power applications, as a key factor weighing on Siltronic’s near-term prospects.
While inventory levels in logic semiconductors have stabilized, memory inventories remain elevated, and power-related stockpiles continue to grow, further limiting visibility into a potential recovery.
The downgrade comes amid a weak financial outlook. Free cash flow is projected to stay negative through 2025 and 2026, with improvements hinging on a rebound in the industry next year.
Although Siltronic maintains a solid liquidity position with over €660 million in cash and no major debt maturities until 2027, Jefferies sees little immediate catalyst for share price appreciation.
Jefferies also slashed its price target on the stock to €50 from €90, attributing the revision to deeper cuts in earnings estimates and an increase in the brokerage’s weighted average cost of capital assumptions.
The lack of expiring long-term agreements in 2025 is expected to prevent severe pricing pressure, but profitability remains under strain. The brokerage expects Siltronic’s EBITDA margin to hover in the mid-20% range next year before potential improvements in 2026 and beyond.
With wafer shipments likely to stay subdued despite a recovery in semiconductor capital expenditures, Jefferies anticipates that any turnaround for Siltronic will take time.