BofA Securities Downgrades Lite-On Technology Corp (2301:TT) Shares to Neutral, Lowers Price Target to TWD110.00
In a recent update, BofA Securities has shifted its rating on Lite-On Technology Corp (2301:TT) shares from Buy to Neutral and decreased the price target to TWD110.00 from the previous TWD125.00. This adjustment is a result of a more cautious outlook on the company's cooling business, with Lite-On being perceived as a late entrant to the market. Despite the downgrade, BofA Securities recognizes Lite-On's strong position in the server power-supply sector and highlights the company's improving margins due to an optimized product mix.
The firm has also revised its earnings per share (EPS) estimates for Lite-On Technology for the years 2024 to 2026, lowering them by 3% annually. As a result, the price objective has been reduced to TWD110, calculated at 16 times the projected EPS for 2025, a departure from the previous valuation of 18 times the forecasted EPS from Q4 2024 to Q3 2025.
This adjustment in the price target multiple to 16 times aligns with the company's median price-to-earnings (P/E) ratio over two years, as opposed to the earlier multiple, which was set at two standard deviations above the average.
Despite the downgrade to Neutral, BofA Securities does not advise an Underperform/Underweight rating for Lite-On Technology. The firm's analysis emphasizes that Lite-On continues to be a top-2 AI server power-supply player, alongside Delta, and is currently valued fairly. Lite-On's stock is trading at 15 times the estimated P/E for 2025, in line with the average P/E ratio of 16 times for its Taiwanese industry peers.
In conclusion, this update highlights the changing dynamics in Lite-On Technology Corp's market position and financial outlook. Investors should consider these adjustments in their investment decisions to align with the latest analysis by BofA Securities.