Softbank stock target raised at Citi on profit growth

Investing.com -- Citi raised its price target on Softbank to JPY255 from JPY240 and maintained its Buy rating in a note on Tuesday, citing strong earnings momentum and a medium-term plan that points to continued profit and dividend growth.

The revision follows Softbank's FY3/26 results and FY3/27 guidance. The company reported FY3/26 revenue of JPY7.0 trillion, up 8% year-over-year, operating profit of JPY1.0 trillion, up 5%, and net profit of JPY0.55 trillion, also up 5%. Citi noted that "both revenue and profit" were up for the year.

For FY3/27, Softbank guided for sales of JPY7.5 trillion, up 6.6% year-over-year, operating profit of JPY1.1 trillion, up 5.5%, and net profit of JPY560 billion, up 1.7%, with the firm "expecting revenue and profit growth."

Citi expects profit growth to stall in the first half of FY3/27 due to one-off items and a difficult year-over-year comparison, before returning to growth in the second half.

Citi also pointed to Softbank's medium-term plan, which targets FY3/31 operating profit of JPY1.7 trillion, representing a compound annual growth rate of 10%, and net profit of JPY700 billion.

The company has guided for dividends per share of JPY8.8 in FY3/27, up from JPY8.6 previously, with plans to continue raising dividends as net profit expands.

The bank also highlighted Softbank's expanding AI business, including new data centers scheduled to begin operations in Hokkaido and Osaka Sakai in FY3/27.

Citi now evaluates the stock using a combination of a dividend discount model and a price-to-earnings multiple, given both shareholder returns and profit growth prospects.

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