The logo of SoftBank Group Corp is displayed at SoftBank World 2017 conference in Tokyo, Japan, July 20, 2017. REUTERS/Issei Kato/Files
TOKYO: A 34% rally has made SoftBank Group Corp the best-performing stock in Japan’s Nikkei 225 Index this quarter. But if analysts are right, the tech investor’s shares may not have much upside left.
Shares of the firm founded by Masayoshi Son rose last week to the highest in almost a year thanks to cost-cutting efforts and a one trillion yen (US$6.8bil or RM32.3bil) share buyback programme.
The rally added US$20bil (RM95bil) to the company’s market value from a recent low in late September.
Yet problems loom. Softbank’s most-valuable holding, Chinese Internet company Alibaba Group Holding Ltd, slumped on Monday to a fresh all-time low in Hong Kong before rebounding.
More broadly, the selloff in US technology stocks – the Nasdaq 100 Index is in danger of notching up its biggest weekly loss of the year – is weighing on valuations of the kinds of companies that Softbank invests in.
Meanwhile, the sluggish market for initial public offerings could weigh on Arm Ltd, the chipmaker that Softbank is trying to list.
“One of the bigger parts of its valuation is Alibaba and it’s been coming down,” said Morningstar Inc analyst Daniel Baker.
“Usually when Alibaba goes down, the stock goes down. The macro factors that are driving this don’t appear to be changing too much.”
Wall Street brokerages are already responding to those worries.
This month, analysts cut their target price for Softbank stock, sending the average share price forecast to the lowest since August 2020, according to Bloomberg data.
Just last week, Jefferies analyst Atul Goyal downgraded the stock to hold, citing “no upside” in shares after its investments plunged.
In many ways, SoftBank’s shares and value is deeply tied to China’s economy, which is facing issues of its own under the weight of zero-Covid curbs and a stumbling property market.
As of June, Alibaba still accounted for about one-fifth of the firm’s total equity value, according to filings.
Its Vision Funds, which take stakes in “tech-enabled growth companies,” also are about 20% invested in China.
After touching a fresh low last Monday, Alibaba’s Hong Kong-listed shares went on to have their biggest weekly gain since June, up 13%, as the Chinese stock market rallied on speculation that the government will pull back from the zero-Covid policy.
The stock is still down 41% this year. — Bloomberg
