AMS: Credit Suisse downgrades to 'sell' - slashes target

(CercleFinance.com) - Credit Suisse has downgraded its neutral rating on the AMS (formerly Austria Mikro Systeme) stock to sell ("underperform").
This is an Austrian semi-conductor maker, which supplies Apple, amongst other companies.

The broker has slashed its target price for the share, which is listed in Zurich, from 27.5 Swiss francs to 16 Swiss francs, suggesting downside potential of over 25%.

"To reflect the ongoing weakness in smartphone demand" -5% yoy on average over last 4 quarters), analysts have slashed their sales forecasts for 2018 to 2020. "iPhone units likely to be down 5%/8% in CY18/CY19,", Credit Suisse adds, which should result in an "intense" pressure on the price of 3D sensing space.

In this context, AMS' operating margin forecasts have been cut by 50 to 150 basis points, resulting in a reduction of between 4% and 17% in corresponding EPS. As a result, the broker has cut its target price, especially as analysts no longer use P/E, but rather the EV/EBITDA multiple.

"The pace and extent of margin improvement may remain slow limiting the company's ability to lower its high net debt position over time," the broker adds.



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