Bridgestone stock falls following analyst downgrade
Deutsche Bank’s decision to downgrade its advice rating for Bridgestone shares from “buy” to “hold” on 12 September resulted in a 1.4 per cent fall in the Japanese tyre manufacturer’s share price to 3,430 yen in response to the report.
The report given in an investor note published the same day suggested that while Bridgestone shares have performed very well over the last 12 months (up 83 per cent) “this has resulted in a re-rating of the shares back more in-line with past trading ranges”. The Deutsche Bank view, voiced through analyst Karl Sanger, was softened with its introduction “we do not see an imminent threat to record levels of profitability – for Bridgestone or the industry. This is evidenced in our earnings projections”. However it the most impacting remark came after this: “That said we do not find cause to assume a further re-rating that can drive meaningful outperformance. Given that combination, we have only modest upside to our target price of 10 per cent so revise our rating to ‘hold’.”
The analysts’ caution appears to be based on its conservative view of Japanese recovery: “We see recovery potential in North America but are cautious on Japan around consumption tax increases as well as soft demand in Asia ex-China”. Although bankers also said they “still view mix favourably”.