"Securities Firm Reports Filled with 'Rose-Colored' Optimism, This Year Many 'Target Price Downgrades'"

[Asia Economy Reporter Koh Hyung-kwang] This year, the number of reports in which securities firms have lowered target prices for listed companies has exceeded 400 by a wide margin. This accounts for about 30% of all reports, nearly three times the number of 'target price downgrade' reports (165) during the same period last year. It appears that the impact of the novel coronavirus disease (COVID-19) has lowered corporate earnings forecasts, negatively affecting securities firms' reports as well.

According to financial information provider FnGuide on the 28th, out of 1,497 stock reports (including duplicates) published by securities firms from the beginning of this year until the 20th, 413 reports, or 27.6%, lowered the target prices of the analyzed stocks. Compared to 165 reports (10.0%) out of 1,642 reports during the same period last year that downgraded target prices, this is a 2.7-fold increase.

The proportion of reports maintaining the existing target prices this year was 64.5% (966 reports), and those with upward revisions accounted for 7.9% (118 reports). Last year, the proportions of maintained and upward target prices were 75.8% (1,245 reports) and 14.2% (232 reports), respectively.

In just this month (from the 1st to the 20th), securities firms have lowered target prices for 265 stocks. This accounts for about 64% of all downgraded reports (413) this year, far exceeding half. The number of target price downgrade reports, which was only 14 in January, increased to 134 last month as COVID-19 spread, and more than doubled again this month.

This trend is quite different from the rosy securities reports that typically feature 'target price upgrades' and 'buy' recommendations. It is interpreted as reflecting concerns that the global economy will fall into a prolonged recession due to the pandemic spreading across the United States and Europe, along with a sharp drop in international oil prices.

The sectors for which securities firms have lowered target prices include almost all stocks, such as airlines and petroleum & chemical industries directly hit by COVID-19, as well as semiconductors, automobiles, finance, and shipbuilding.

Among recent reports, the stock with the largest target price adjustment is Hyundai Glovis. Ebest Investment & Securities lowered Hyundai Glovis's target price by 60%, from 220,000 won to 90,000 won.

Shinhan Financial Investment also adjusted the target price of Fila Holdings from 70,000 won to 30,000 won, a 57% reduction. NH Investment & Securities lowered Fila Holdings' target price by 28% to 49,000 won.

Due to the sharp drop in international oil prices, SK Innovation's stock price fell significantly, and its target price was lowered by 39%, from 177,000 won to 108,000 won (KB Securities). An industry insider said, "Considering the characteristic of securities firms that rarely lower target prices, this year is indeed an extremely unusual situation," adding, "It means that the negative impact of COVID-19 on corporate earnings is that significant."