Citi sees limited upside for MKS Instruments stock amid delayed NAND recovery By Investing.com

On Monday, Citi adjusted its stance on MKS Instruments (NASDAQ:) stock, shifting from a “Buy” to a “Neutral” rating and altering the price target to $120 from the previous $145.

The decision comes as part of Citi’s Phase 3 sector stock-picking framework, which now favors consumables or wafer starts stocks over those of original equipment manufacturers (OEM) and component markers.

The firm acknowledged MKS Instruments’ potential to capitalize on the semiconductor market’s recovery, particularly through its photonics business, which is expected to surpass wafer fabrication equipment (WFE) and benefit from AI-driven design activities in advanced packaging substrates.

However, concerns have been raised regarding the delayed recovery of the NAND market, to which MKS Instruments is considered to be significantly exposed.

Additionally, Citi pointed out the persistent weakness in the non-semiconductor segments of MKS Instruments’ business, such as PCs, smartphones, and Specialty Materials. The latter, making up about one-third of the company’s operations, is anticipated to grow at a slower pace than the semiconductor market, albeit with higher margins.

The financial institution has maintained its fiscal year 2024 earnings per share (EPS) estimate for MKS Instruments but has reduced the fiscal year 2025 EPS forecast by 7%, citing the NAND WFE delay. The new price target of $120 is based on a 16 times price-to-earnings (P/E) ratio applied to the revised 2025 earnings estimate, a decrease from the previously used 18 times ratio, reflecting a broader market multiple compression.

In other recent news, MKS Instruments has been the subject of significant analyst attention and corporate developments. Cantor Fitzgerald initiated coverage on the company with an Overweight rating and a price target of $140, citing MKS Instruments’ strong position in the semiconductor industry. Meanwhile, Goldman Sachs launched coverage with a Neutral rating and a 12-month price target of $129.

In addition, MKS Instruments announced the appointment of Ram Mayampurath as the new Executive Vice President, Chief Financial Officer, and Treasurer. TD Cowen lowered the price target for MKS Instruments to $150, maintaining a Buy rating on the stock.

The company also declared a quarterly cash dividend of $0.22 per share. Furthermore, MKS Instruments upsized and priced its private offering of convertible senior notes from $1.0 billion to $1.2 billion, aimed primarily at repaying the company’s outstanding Term Loan B.

These are the recent developments for MKS Instruments, which also include a variety of analyst upgrades and adjustments. Morgan Stanley and BofA Securities initiated coverage with Overweight and Buy ratings respectively, while Deutsche Bank issued a Hold rating.

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