Investing.con -- Shares of Signify NV (AS:LIGHT) dropped over 5% on Wednesday following a downgrade by Barclays (LON:BARC), which cited several financial and operational concerns.
The stock was downgraded to "underweight" from "neutral," with analysts expressing skepticism over the company’s ability to meet its financial targets amidst challenging market conditions.
Barclays outlined multiple headwinds for Signify, including pressure from Chinese competitors in the European professional market and tepid recovery in consumer demand.
The analysts also flagged issues related to domestic market challenges in China and potential U.S. tariff risks, as about 30% of Signify's revenue is tied to the U.S., with significant manufacturing operations in China and Mexico.
These factors have led Barclays to lower its price target for Signify to €18 per share, reflecting a potential downside of 17.4% from the current levels.
Financially, the report paints a grim outlook for revenue and free cash flow growth in 2025 and 2026.
Barclays projects about €900 million in cumulative FCF from the second half of 2025 to 2027, which will be insufficient to cover a combined €1 billion in debt repayments and €400 million in dividend obligations.
This financial strain led Barclays to conclude that there is limited room for share buybacks, despite earlier investor expectations for potential capital returns.
The downgrade was further substantiated by concerns about optimistic market consensus figures.
Barclays estimated a 4-13% downside to EBITA for 2025 and 2026, contrasting with consensus expectations for a steady 2-3% organic growth and margin expansion during the same period.
This discrepancy is driven by a negative pricing environment, slow growth in key markets like Germany and China, and competitive price pressures in Europe.
Moreover, the anticipated savings from restructuring programs are unlikely to counterbalance these challenges, according to Barclays.