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Investing.com -- UBS cut its rating on Soitec to “neutral” from “buy” rating after another round of weak results and rising doubts about the company’s longer-term fundamentals, sharply lowering its 12-month price target to €26 from €80, in a note dated Monday.
The brokerage said the downgrade follows “another set of underwhelming results,” adding that while it still expects a cyclical rebound, mounting signs of structural pressure have reduced confidence in Soitec’s recovery trajectory.
UBS cited persistent underperformance in mobile, where Soitec posted a 2% CAGR decline over the past five years compared with a 2% CAGR gain for Qorvo and Skyworks, as well as the impact of die shrink and more efficient modules tempering RF-SOI growth.
The end of the company’s decade-long cross-licensing agreement with GlobalWafers in July 2025 also introduced the risk of new competitors producing SOI without Soitec’s Smart Cut process, according to management comments referenced in the report.
A €41 million silicon carbide impairment recorded in fiscal 2Q26, triggered by intensified competition from Chinese mono-SiC players, further weighed on the long-term view.
UBS said these market conditions make a near-term recovery in that segment unlikely, echoing management’s commentary that opportunities in next-generation power supply and datacenter applications are not expected to materialize soon.
Near term, UBS still expects a cycle-driven lift in FY27, noting Soitec is “substantially under-shipping” relative to end-market demand, with FY26 revenue forecast to fall 33.8% before rising 10% the following year.
Mobile and automotive/industrial revenue are projected to drop 33% and 60% year over year in FY26, respectively, as inventories continue to reset.
The brokerage sees inventories normalizing into FY27, which is expected to provide some cyclical support.
But UBS’ revised valuation shows how much pressure the structural factors exerted on the outlook.
UBS cut its terminal EBIT margin assumption to 10% from 20%, reflecting the 2015-27 average margin of 9%, and trimmed medium-term growth expectations as uncertainty around content growth and product traction deepens.
The price-target reduction is driven by these margin changes and by lower EPS forecasts, with FY27 EPS cut 59% and FY28 EPS cut 45%.
UBS’ model now assumes FY26 revenue of €590 million, down from €756 million previously, and FY27 revenue of €649 million compared with €869 million prior. Gross margin for FY25 was also revised to 22.6% from 31.7% due to lower utilization in the second half, the brokerage said.
The brokerage added that the risk-reward balance has shifted. While a cyclical upswing remains possible, the medium-term structural questions, market share erosion, technology shrink effects, the licensing change with GlobalWafers, and the silicon carbide setback, are expected to cap the upside.