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Goldman Sachs upgraded Panasonic Holdings Corp. (PCRFY, Financials) from "Neutral" to "Buy" and raised its price target to JPY 2,500 from JPY 1,770, citing the company's latest management reform strategy and attractive valuation.
The investment bank thinks the attempts at restructuring might act as a spark for stock revaluation and change investor opinion of the Japanese industrial powerhouse.
Following Panasonic's Q3 results presentation on Feb. 5, the upgrade follows the company's detailed management reform proposal meant to solve long-standing inefficiencies and raise profitability. The strategy immediately addresses issues expressed by Goldman Sachs in a January 23 study, which earlier focused on issues of corporate governance, profitability, and company structure.
Goldman Sachs analysts think the company's most recent actions point to a major change in approach, thereby raising awareness of its restructuring measures and creating conditions for possible long-term profits. Although it is yet unknown if Panasonic can match the rate of expansion of its rivals, the company observed that the developments might represent a turning point for the stock.
Panasonic has battled to lose its reputation as a heritage industrial conglomerate, unlike Hitachi Ltd. (HTHIY, Financials) and Sony Group Corp. (SONY, Financials), who have effectively rebranded themselves as growth-oriented technological firms. Renowned for its consumer electronics, battery production, and industrial solutions, the business has been trying to simplify its processes and fit changing market circumstances.
Although Goldman Sachs analysts admit that Panasonic's capacity to completely turn into a growth stock is yet unknown, the recent management changes inspire hope in the long run of the business. The bank thinks these initiatives could cause Panasonic's stock value to be fundamentally reassessed in the next quarters.
This article first appeared on GuruFocus.