Harmonic (NASDAQ:HLIT) Drive Systems Inc (6324: JP) (OTC: HSYDF) has faced a downgrade in its stock rating by a Jefferies analyst from "Hold" to "Underperform."
Accompanying this downgrade, the analyst also reduced the price target for the company's shares to ¥2,500 from the previous ¥4,300.
The downgrade comes amidst concerns about the company's current strategy and its impact on value. The analyst highlighted the potential value destruction due to Harmonic Drive's pricing strategy and the expansion of production in areas like humanoid reduction gears, which lack evidence of a solid market formation in the near future.
After a post-results meeting with the company's management, the analyst projected that orders from the traditional industrial robot sector, which is a significant profit contributor, are expected to remain flat. This stagnation is anticipated to negatively affect the company's order mix.
The analyst's outlook is also influenced by the valuation of Harmonic Drive's stock, which is considered high given the expected challenges.
The valuation is now seen as unjustifiable in light of the potential for an unfavorable order mix and the absence of market growth in the humanoid gear sector.
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