On Monday, Jefferies adjusted its outlook on ams OSRAM AG (AMS:SW) (OTC: AUKUF) shares, a leading provider of optical solutions, by lowering the price target to CHF2.40 from the previous CHF3.10. Despite this reduction, the firm maintains a Buy rating on the company's shares.
The revision reflects the company's ongoing efforts to navigate through challenging market conditions. According to Jefferies, ams OSRAM's management has been effectively executing strategies to mitigate the cost impact following the termination of its microLED project. These strategies have included reducing headcount, impairing assets, capitalizing on research and development, and adjusting the development setup.
ams OSRAM's Kulim manufacturing facility is reportedly attracting considerable interest from potential buyers, indicating a positive outlook for the company's restructuring efforts. Jefferies anticipates that these measures will lead to improved profit margins in the second half of 2024. The firm's projections are based on the ramp-up of new products and a reduction in costs.
Looking further ahead, Jefferies forecasts that ams OSRAM is poised for significant financial growth. The expectation is for the company to achieve double-digit EBIT margins and generate positive free cash flow in the year 2025. This optimistic outlook is predicated on the company's ability to continue its current trajectory of cost management and product development.
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