On Friday, Macquarie analysts downgraded Disco (OTC:DSCSY) Corp. (6146:JP) (OTC: DSCSY) stock rating from Outperform to Neutral, despite increasing the price target to JPY50,500 from JPY46,850. The adjustment reflects concerns over the potential risk of market expectations surpassing the company's performance capabilities, despite acknowledging stronger product shipments and solid sales in specific areas.
Disco Corp., which specializes in manufacturing and selling precision cutting, grinding, and polishing machines, has been reviewed by Macquarie following its third-quarter parent-only sales results. These results suggested that the consolidated outcomes might fall short of previous Macquarie estimates. However, the firm's full-year operating profit estimate remains largely unchanged due to robust sales driven by GenAI and HBM-related products.
The updated price target represents an 8% increase from the previous target, indicating some level of confidence in the company's financial prospects. This revision comes even as Disco experiences a softening in sales related to silicon carbide (SiC) products. SiC materials are critical components for various high-performance electronic devices, and a downturn in sales in this segment could impact the company's overall financial health.
Macquarie's analysts have expressed caution, stating that while the company has displayed strong sales in certain areas, the overall market consensus for Disco's performance might be overly optimistic. This sentiment has prompted the downgrade to Neutral, suggesting that the stock's current valuation adequately reflects its future earnings potential.
In summary, while Disco Corp. has demonstrated solid sales in its GenAI and HBM-related products, Macquarie has adjusted its stance on the stock due to valuation concerns and the possibility that consensus forecasts may not align with the company's actual results. The raised price target, however, suggests that there is still some positive outlook for the company's financial performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.