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Investing.com -- Shares in German semiconductor materials supplier jumped Monday after Jefferies upgraded the stock to Buy, saying the recent rally still leaves room for “likely further rerating ahead” as the wafer maker moves towards what could be a cyclical recovery into the second half of 2026.
With the stock still trading near historical lows at 0.9 times 2026 price-to-book, and no fresh negative catalysts in sight, the brokerage argues that sentiment has room to improve despite elevated customer inventories.
It notes that wafer stocks typically rerate six to nine months before expected upgrades and sees Q3 as “likely marking another bottom."
Siltronic shares were up 7% at €57.85 as of 12:21 GMT, nearing their 12-month highs.
Siltronic has rallied on signs of strengthening memory chip demand flagged by SK Hynix, Micron and Samsung, with Jefferies pointing out that around 17% of the free float remains shorted.
The analysts expect a weak third quarter due to volume postponements into Q4, forecasting sales of €305 million, down 14.7% year-on-year, and EBITDA of €68.6 million as start-up costs in Singapore weigh on profitability.
Jefferies says medium-term fundamentals remain supportive, citing gradual volume recovery in smartphones and PCs, which make up roughly 40% of the wafer market, alongside strong growth in servers and IoT devices.
The rise of AI applications is seen as a key structural driver, with “AI-server x8, electromobility +60-100%, 5G +40-50%” increases in silicon content boosting leading-edge wafer demand.
“The rapid rise of AI is driving demand for leading-edge wafers, which in addition to data centers, also benefit from the growing share of AI PCs/smartphones from 30% in ’25 to becoming the norm/70% by 2029,” analysts wrote.
While legacy 300mm demand remains subdued and 200mm wafers face competition from China, they expect continued inventory drawdown to support a gradual recovery, noting that memory, logic and power segments are all showing a positive inflection.
Smartphone shipments rose 11% quarter-on-quarter in Q3, with PC volumes up 9.5%, which the analysts view as an encouraging sign.
Jefferies has lifted its price target to €75 from €45, citing “higher over the cycle profitability” and improved relative valuation.
It models a base-case upside of 35%, with a potential move to €100 under a stronger recovery scenario. The firm’s new estimates assume a return to free cash flow generation in 2026 and a recovery in EBITDA margins towards 33% in 2027.
Despite caution on the pace of recovery due to still-elevated wafer inventories, analysts believe that “in the absence of fresh negatives, sentiment should continue to improve” as the next upgrade cycle approaches.