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Important information: The value of investments can go down as well as up so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. This is a third-party news feed and may not reflect Fidelity’s views.

Berenberg lowers target price on XP Power

(Sharecast News) - Analysts at Berenberg lowered their target price on power supply solutions group XP Power from 1,700.0p to 1,400.0p on Tuesday but said its thesis on the stock was unchanged. Berenberg said XP Power's trading update on 16 February was "disappointing", guiding to a full-year 2024 performance that was "significantly below market expectations", while also revising down FY23 profitability on account of financial close processes identifying additional impairments and amortisation-related items.

The German bank noted that the speed of deterioration in trading prospects, having last heard from management on 10 January, was "a surprise" and raises likely questions over credibility following October's profit warning and resulting equity raise.

However, while this will weigh on the shares in the short term, Berenberg thinks its thesis remains largely unchanged, albeit from a lower starting point in both fundamentals and share price.

"A recovery in the semiconductor industry capex cycle and an improving macroeconomic backdrop, both expected at some point in H2 2024, could trigger an upgrade cycle from now-reset conservative forecasts, with the company set to rebuild from trough margins," said the analysts.

"We think a 15x P/E multiple for FY 2025 as a recovery year remains achievable, and so reiterate our 'buy' recommendation but with a reduced price target of 1,400.0p."

Reporting by Iain Gilbert at Sharecast.com

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Important information: This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Past performance is not a reliable indicator of future returns.

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