Better Second Quarter
Stock firms expected that LG Electronics would see poor financial performance in the first quarter, lowering its target stock price. However, they forecast that the company will see a performance improvement in the second quarter.
Even though Nomura Financial Investment kept its LG Electronics investment opinion of “buy,” it lowered its target stock price to 70,000 won (US$64).
Nomura Financial Investment said that LG Electronics would face difficulty this year due to the stagnant TV business from the unfavorable condition of exchange rates and intensifying competition in the smartphone market. Accordingly, it downgraded the target price from 72,000 won (US$65.83) to 70,000 won (US$64), reflecting the poorer-than-expected performance in the first quarter.
However, Nomura Financial Investment forecast that LG Electronics would see better performance in the second quarter due to the launch of new products, and recommended to buy the stocks before it shows a strong performance in the second quarter.
HI Investment & Securities also expected that LG Electronics’ performance would be lower than expected in the first quarter. However, it expected that the performance would turn around owing to the advent of the new cell phone product cycle and the growing demand of home appliances and air conditioners from the peak season in the second quarter.
Kiwoom Securities also expected that the TV sector would drag down the improvement of LG Electronics’ performance in the first quarter. It also said that the performance momentum would be strong due to the effect of new models, and the stock prices would go up accordingly.
Shinhan Investment also lowered LG Electronics’ target stock price to 74,000 won (US$67.65). However, it kept the investment opinion of “buy.”
An official from Shinhan Investment said, “As the operating profit this year is expected to decrease by 12 percent to 1.715 trillion won (US$1.57 billion) from the existing 1.949 trillion won (US$1.78 billion), we lowered the target stock price to 74,000 won (US$67.65). Due to the recent concerns over the slowdown in performance from the weak euro and the weak currency of emerging countries, the stock prices stay weak. Also, Electrolux's purchase of GE Appliances will intensify competition in the home appliance market in the U.S. However, the current stock price has a 2015 price book-value ratio of 0.8x and is unlikely to drop further. Favorable consumer reactions to the G4 are expected to add momentum to bounce back share prices.”