Macquarie Lowers SoftBank Stock Target Amid Cooling Interest in AI-Exposed Companies

Macquarie analysts have adjusted their price target for SoftBank Group, reflecting a more cautious outlook on companies linked to artificial intelligence (AI) amid recent market fluctuations.

The new target price is set at ¥10,000, down from the previous ¥11,750, due to a decrease in market enthusiasm for AI-related stocks. This revision occurs despite SoftBank’s strong financial health and solid asset portfolio.

The firm highlights that recent market conditions have impacted the valuation of SoftBank’s significant holdings, notably its stake in Arm. Arm’s equity experienced a notable increase of ¥6.6 trillion, leading to a rise in SoftBank’s net asset value (NAV) to ¥35.3 trillion by the end of the June quarter.

However, following the market volatility, especially concerning AI stocks, a mark-to-market adjustment has reduced the NAV to ¥24.9 trillion as of August 6.

Analysts recognize SoftBank’s ongoing financial resilience, with a loan-to-value ratio of 10.9% and liquidity of ¥4.3 trillion remaining stable despite the challenging environment. Additionally, a ¥500 billion buyback authorization announced alongside the latest results further affirms the company’s strong balance sheet.

Macquarie’s current valuation assigns a $119 billion enterprise value to Arm, aligned with prevailing market conditions, and takes into account the broader sector’s response to the diminishing excitement around AI.

Despite the lowered target price, Macquarie retains an Outperform rating for SoftBank, remarking that the company’s fundamentals are robust, and there remains potential for growth, particularly with stability in its telecommunications assets and future advancements in Arm’s valuation.

In summary, while Macquarie has revised its expectations, there remains optimism regarding SoftBank’s long-term prospects.