- SoftBank experienced huge losses during the recent quarter from plummeting valuations on investments in Uber and WeWork.
- UBS analyst Kei Takahashi wrote in a note clients Wednesday that “the worst news is out of the way” and things could be looking up for SoftBank.
- Takahashi has a “buy” rating and a price target of 7,100 yen, or about $65, for SoftBank. That figure represents more than a 68% premium from where shares traded on Thursday.
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“We think the worst news is out of the way for the time being,” Takahashi wrote in a note to clients Wednesday. “Although it could take some time for expectations for the [SoftBank Vision Fund] business to recover, we expect excessive concern to gradually dissipate.”
The Japanese telecommunications giant on Wednesday posted a $6.5 billion operating loss for the July-September quarter, compared to $6.5 billion profit during the same period last year. SoftBank attributed the bulk of its losses to sliding valuations in equity investments.
Takahashi said the $4.56 billion in unrealized valuation losses from SoftBank’s stakes in companies including Uber and the $3.5 billion loss from WeWork fell in-line with UBS’s expectations.
The financing SoftBank provided to WeWork should also be enough to help the struggling company improve its cash position, he added.
“With aid in the form of $1.5bn in warrants already issued and $5.05bn in debt, we think there should be more than enough capital to allow free cash flow to return to the black,” Takahashi said.
SoftBank slashed its valuation for WeWork to just under $8 billion as of September 30, down from $29.6 billion as of June 30, according to an investor presentation.
UBS has a”buy” rating and a price target of 7,100 yen, or about $65, for SoftBank. That represents about a 68% premium from where shares traded Thursday.