Last Update 14 Dec 25
NOTE: Reset Multiple And Solid Quarter Will Drive Long-Term Upside
Narrative Update on Analyst Price Target
Analysts have cut their price target on NOTE to $7 from $18, reflecting a reset valuation multiple. They also point to a solid recent quarterly report as support for the updated outlook.
Analyst Commentary
Street research following the latest quarter highlights a mix of optimism around execution and caution around the appropriate valuation framework for NOTE.
Bullish Takeaways
- Bullish analysts view the recent quarterly performance as solid. This reinforces confidence that management can execute against near term growth targets.
- The reduced target is framed as a valuation reset rather than a downgrade in fundamentals. This suggests potential upside if the company sustains its current operating momentum.
- Improved visibility into revenue trends and customer demand is seen as supportive of the new target. The price objective is lower, but still described as constructive.
- Analysts see the updated valuation multiple as more realistic. They argue that it better balances growth potential with execution risk while still implying an attractive return profile.
Bearish Takeaways
- Bearish analysts flag the magnitude of the target cut as evidence that prior expectations embedded an overly aggressive growth and margin trajectory.
- The reset multiple reflects concerns that the market may be less willing to pay a premium for execution that is still early and exposed to macro and competitive pressures.
- Some caution that, despite a solid quarter, NOTE must deliver several consistent reports before investors will fully re rate the shares toward the revised target.
- There is lingering skepticism over how quickly the company can translate its current pipeline and product momentum into durable, high quality growth that would justify even the reduced valuation.
Valuation Changes
- Fair Value: unchanged at SEK 206.0, indicating no adjustment to the intrinsic value estimate.
- Discount Rate: unchanged at 6.69 percent, a minimal change that has limited impact on the valuation framework.
- Revenue Growth: effectively unchanged at around 8.54 percent, suggesting the growth outlook is stable.
- Net Profit Margin: effectively unchanged at about 8.50 percent, indicating no material shift in profitability expectations.
- Future P/E: unchanged at 16.20x, keeping the overall valuation broadly intact.
Key Takeaways
- Strategic production shifts and merger plans aim to sustain margins and improve profitability through cost reduction and efficiency gains.
- Targeted growth in Security & Defense and Greentech segments indicates potential revenue increases and improved net margins.
- Reliance on large customers and macroeconomic pressures could risk revenue growth, while weak market segments may hinder overall performance.
Catalysts
About NOTE- Provides electronics manufacturing services in Sweden, Finland, the United Kingdom, Bulgaria, Estonia, China, and internationally.
- NOTE plans to move production from China to European facilities if U.S. tariffs remain, potentially maintaining revenue without losing business. This strategic shift can help sustain operating margins by avoiding tariff-related costs.
- Despite short-term challenges, NOTE sees opportunities for growth in the Security & Defense segment, partly due to increased demand and shorter lead times. This growth could drive future revenue increases and bolster profitability.
- The planned merger of UK factories from four to three aims at reducing the cost base and sustaining margins, which can improve net margins and bolster earnings in the future.
- NOTE is focused on streamlining operations and reducing inventory, leading to improved cash flow and potential revenue growth. Improved cash management could enhance net margins through efficiency gains.
- The focus on growing industrial Greentech and security markets signals potential revenue growth in segments with high growth potential, likely positively impacting overall earnings and net margins.
NOTE Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming NOTE's revenue will grow by 8.2% annually over the next 3 years.
- Analysts assume that profit margins will increase from 6.7% today to 8.0% in 3 years time.
- Analysts expect earnings to reach SEK 386.5 million (and earnings per share of SEK 12.58) by about August 2028, up from SEK 257.0 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.7x on those 2028 earnings, down from 21.0x today. This future PE is lower than the current PE for the GB Electronic industry at 27.8x.
- Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.37%, as per the Simply Wall St company report.
NOTE Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Uncertainty surrounding U.S. tariffs and international trade could negatively impact sales that are connected to the U.S., potentially affecting revenue growth.
- The company's reliance on a few large customers, as represented by a significant portion of sales coming from the Top 25 customers, suggests potential risk in revenue concentration if any major customer reduces orders.
- The anticipated negative global economic outlook, including lowered growth forecasts, could have a dampening effect on NOTE's overall revenue potential.
- Continued challenges in certain segments like Communications and MedTech, expected to remain weak, may hinder robust revenue growth across the company’s diverse operations.
- Macroeconomic factors such as salary inflation in the U.K. and fluctuating currency rates could pressure net margins if cost increases are not fully offset by pricing strategies or operational efficiencies.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of SEK168.5 for NOTE based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK210.0, and the most bearish reporting a price target of just SEK127.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK4.8 billion, earnings will come to SEK386.5 million, and it would be trading on a PE ratio of 14.7x, assuming you use a discount rate of 6.4%.
- Given the current share price of SEK189.7, the analyst price target of SEK168.5 is 12.6% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
