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Investing.com -- Siemens stock dropped 3% on Wednesday after Morgan Stanley downgraded the German industrial giant to Equal-weight from Overweight, citing concerns about a subdued recovery in its Digital Industries division.
The investment bank highlighted three key factors behind its downgrade. First, Morgan Stanley expects the company’s Digital Industries division to experience a weak recovery in the first half of 2026, with upcoming guidance likely to disappoint investors. The bank’s 2026 group Industrial EBIT forecast now sits 4% below consensus expectations.
Second, the analysts pointed to intensifying competition in China, noting that "it will be challenging to recover China margins back to historical levels." Finally, Morgan Stanley expects Siemens to continue making mid-sized software acquisitions rather than increasing share buybacks, which they believe will "continue to put pressure on return on capital employed."
The bank also indicated that Siemens shares no longer trade at a significant discount to their theoretical sum-of-the-parts valuation, removing what had previously been viewed as a potential catalyst for the stock.
The downgrade comes as Siemens prepares to release its fiscal year 2025 results on November 13, when it will also issue guidance for the first quarter of 2026 and the full year.
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