SoftBank: Nomura Sees 43% Upside
Nomura has lifted its target price on SoftBank (9984.JP) from JPY11,550 a share to JPY12,770 a share.
SoftBank is a major shareholder of Chinese e-commerce giant Alibaba (BABA) shareholder and is the parent of U.S. mobile network operator Sprint (S). The recent strong performance by the two companies has prompted analyst Daisaku Masuno, who has a buy rating on SoftBank, to upgrade his target price on the Japanese tech and telecom giant:
On 14 June, we revised our earnings forecasts for Alibaba Group Holding and raised our target price from $139 to $170, and on 18 June, we revised our forecasts for Sprint. In light of these changes, we revise our forecasts for Softbank Group and raise our target price, derived using a sum-of-the-parts approach, from ¥11,550 to ¥12,770.
But what's more exciting is SoftBank's potential to become an innovator following its acquisition of semiconductor and software design company ARM Holdings:
We think that since its acquisition of ARM Holdings, Softbank Group has transformed into a company that is capable of accelerating technological evolution on a global scale and that is positioned to reap the benefits of these changes. The share price still looks low to us and we maintain our Buy rating on the stock as one of our two top picks in the telecom sector.
ARM announced its new DynamIQ CPU (central processing unit) architecture in March 2017 and plans to improve AI (artificial intelligence) performance by 50x over the next three to five years. We think this expansion in edge computing capacity raises the probability that the company could offer of a wide range of services on handsets. In IoT (Internet of Things), the company has already built a cross-layer ecosystem featuring secure CPUs, an open and free OS, compatibility with the NB-IoT communication protocol for IoT, and security provided via SaaS (software as a service).
SoftBank shares are up 15% this year and trade at 15 times forward earnings, which is slightly above a five-year average of 14 times.
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