Macquarie analysts have revised their price target for SoftBank (TYO:9984) Group, reflecting a more cautious stance on AI-exposed companies amid recent market volatility.
The analysts now set a target price of ¥10,000, down from ¥11,750, citing a cooling in the market’s enthusiasm for AI-related stocks. This adjustment comes despite SoftBank's strong financial position and robust asset portfolio.
According to the firm, the recent market dynamics have influenced the valuation of SoftBank’s key holdings, particularly its stake in Arm.
Macquarie notes that the equity in Arm saw a significant increase of ¥6.6 trillion, contributing to a rise in SoftBank’s net asset value (NAV) to ¥35.3 trillion at the end of the June quarter.
However, the market volatility that followed, particularly around AI-exposed names, is said to have led to a mark-to-market adjustment, bringing the NAV down to ¥24.9 trillion as of August 6.
The analysts acknowledge SoftBank’s continued financial strength, with a loan-to-value ratio of 10.9% and liquidity of ¥4.3 trillion, which remain stable despite the challenging market conditions. A ¥500 billion buyback authorization, announced alongside the results, further underscores the company’s solid balance sheet.
Macquarie’s valuation now incorporates a $119 billion enterprise value for Arm, aligned with current levels, and reflects the broader sector’s response to the cooling AI enthusiasm.
Despite trimming the target price, Macquarie maintains an Outperform rating on SoftBank, noting that the company’s fundamentals remain strong, and the potential for upside still exists, particularly with stability in its telecommunications assets and future developments in Arm’s valuation.
Overall, while Macquarie has adjusted expectations, they remain optimistic about SoftBank’s long-term prospects.