On Monday, Goldman Sachs (NYSE:GS) adjusted its stance on HOYA Corporation (7741:JP) (OTC: HOCPF), downgrading the stock from Buy to Neutral and reducing the price target to JPY22,000 from the previous JPY23,000. The revision follows a significant rebound in HOYA's first-quarter earnings driven by EUV blanks and HDD glass substrates, which propelled the company's shares near their year-to-date high.
The analyst acknowledged the sharp recovery in earnings from these segments as a previously identified positive catalyst for the stock's performance. Despite the downgrade, the firm's outlook for HOYA remains favorable, with expectations for continued earnings growth in the fiscal years 2025 to 2026. This optimism is based on two key factors: the upswing in the cycle for both EUV blanks and HDD glass substrates, which are central to HOYA's earnings, and the diminishing impact of systems issues on the life care business.
The life care segment, which had been adversely affected by systems issues, is anticipated to normalize after experiencing a low point in the first quarter. Goldman Sachs also commends HOYA's management for their prudent cost control measures amid macroeconomic uncertainties, ensuring the company's ability to maintain near-term profitability. Additionally, the firm's ongoing share buyback program is viewed as a positive action supporting shareholder value.
Goldman Sachs' position reflects a cautious but optimistic view of HOYA's financial prospects, considering both the company's recent performance and its strategic measures to sustain growth and profitability in a challenging economic environment.
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