Key insights
- Goldman Sachs upgraded Rohm to Buy, citing strong AI server growth prospects and increased sales targets for AI/DC semiconductors. The firm believes Rohm's SiC business can become highly profitable, potentially achieving operating profitability in FY27. This upgrade suggests a positive outlook for semiconductor companies supplying AI infrastructure, potentially benefiting related US tech stocks through supply chain and demand trends.
Investing.com - Goldman Sachs upgraded Rohm Co Ltd. (TYO:6963) (OTC:ROHCY) to Buy from Neutral on Monday, raising its price target to JPY6,500.00 from JPY3,300.00.
The upgrade follows Rohm’s FY25 results, in which the company increased its FY30 sales target for AI/DC to ¥100 billion from ¥30 billion, with SiC accounting for ¥30 billion. Goldman Sachs believes sales could expand faster than the company’s FY30 target due to the trend toward higher voltages in AI servers and growing demand for various semiconductors for AI servers.
The optimism comes despite Rohm’s current profitability challenges. The company remains unprofitable over the last twelve months with an EPS of -$2.59, according to InvestingPro data. Yet investors have embraced the turnaround story, driving shares up 179% over the past year and 125% in the last six months. InvestingPro analysis suggests the stock may be overvalued at current levels relative to its Fair Value.
The firm sees potential for Rohm’s SiC business to transform from a large loss-maker to a highly profitable business. The SiC business recorded an impairment of just under ¥200 billion in FY25 due to a change in the EV demand outlook, and fixed costs for the business are expected by Rohm to decline from FY26 by about ¥20 billion.
Goldman Sachs forecasts the SiC business could achieve operating profitability in FY27, ahead of Rohm’s FY28 assumption. The firm projects a loss of about ¥20 billion in FY26, a halving of the loss year-over-year, and has updated its forecast to breakeven in FY27.
Goldman Sachs notes that various companies are attempting to divert EV-related parts and devices with strengths in voltage and heat resistance to AI server applications around the power supply. The firm believes Rohm has the potential for earnings recovery with the most operating leverage among these companies.
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