2357: Memory Supercycle And Tariff Risks Will Pressure Margins And Share Price

Analysts have trimmed their price target on ASUSTeK Computer to NT$500 from NT$625, reflecting expectations of heightened margin pressure in a tepid hardware demand environment, despite slightly lower discount rates and stronger projected revenue growth.

Analyst Commentary

Bearish analysts have underscored that the lower NT$500 price target better reflects rising execution risk in a challenging hardware cycle, with limited room for valuation multiple expansion given intensifying margin pressure.

The downgrade in rating signals growing concern that earnings forecasts may be too optimistic if the memory supercycle continues to push component costs higher while end demand remains subdued.

Commentary has also highlighted that recent share price performance already discounts much of the anticipated revenue recovery, leaving the stock exposed to downside if growth or profitability fails to meet expectations.

In addition, bearish analysts warn that competitive dynamics in PCs and components could constrain pricing power, making it harder for ASUSTeK Computer to defend gross margins and sustain double digit earnings growth over the medium term.

Bearish Takeaways

• The cut in price target to NT$500 reflects a view that current valuation does not fully account for mounting margin pressure in a weak hardware demand environment.
• Bearish analysts see growing risk that operating leverage will work in reverse if revenue growth slows, leading to earnings disappointments versus current consensus.
• Concerns center on the possibility that the memory supercycle raises costs faster than ASUSTeK Computer can pass them through, compressing profitability and limiting cash flow generation.
• With limited near term catalysts and increased uncertainty around sustainable growth, the risk reward profile is viewed as skewed to the downside at prior target levels.

What's in the News

• The Trump administration is considering tariffs on imported electronic devices based on the value of chips inside each product, potentially impacting ASUSTeK as part of a broad group of global hardware makers (Reuters).
• ASUS announced its Always Incredible virtual launch event for CES 2026, where it will showcase a broad portfolio of AI driven PCs, mini PCs, and edge devices aligned with its Ubiquitous AI, Incredible Possibilities strategy (company announcement).
• ASUS unveiled new AI and HPC optimized storage and infrastructure solutions at Supercomputing 2025, reinforcing its positioning as a full stack provider for large scale AI data center deployments (company announcement).
• ASUS IoT introduced the PE3000N compact edge AI platform, powered by NVIDIA Jetson Thor and targeting next generation robotics and intelligent automation use cases in harsh industrial environments (company announcement).
• ASUS launched the ProArt P16 portable workstation and other high end AI enabled client devices, underscoring its push into creator workflows and professional grade AI workloads on the client side (company announcement).

Valuation Changes

• The fair value estimate has risen moderately from NT$483.34 to NT$517.98, implying modest upside despite the lower target price.
• The discount rate has edged down slightly from 7.01 percent to 6.90 percent, reflecting marginally lower perceived risk in the valuation model.
• The revenue growth assumption has increased meaningfully from 9.55 percent to 11.94 percent, indicating higher expectations for top line expansion.
• The net profit margin forecast has fallen significantly from 6.29 percent to 3.98 percent, capturing heightened margin compression concerns.
• The future P/E multiple has expanded from 8.67x to 12.18x, signaling a higher valuation being applied to projected earnings despite profitability headwinds.