On Thursday, Kepler Cheuvreux adjusted its stance on Prosus (OTC:PROSF) NV (PRX:NA) (OTC: PROSY) shares, downgrading the rating from Buy to Hold, accompanied by a decrease in the price target to €36.30 from the previous €44.60. The $84 billion market cap company has seen its stock decline recently, with InvestingPro data showing negative momentum over the past month. The revision by Kepler analysts reflects concerns over the company's future due to recent developments involving its significant holding, Tencent (HK:0700).
The strategy of Prosus under the leadership of new CEO Bob van Dijk emphasizes the creation and utilization of ecosystems to enhance value by drawing on synergies across various business areas, including customer cross-selling and centralized AI development. The company's merger and acquisition strategy also targets larger investments that can benefit from this ecosystem. This approach has contributed to solid revenue growth of 12.2% over the last twelve months.
However, the inclusion of Tencent, which represents 74% of Prosus's Net Asset Value (NAV), in the US Department of Defense's Chinese Military Companies list on January 6, has introduced uncertainty. The implications of this designation on Tencent and, by extension, on Prosus are not fully clear at this stage.
Kepler's downgrade reflects a cautious approach to the valuation of Prosus due to the lack of clarity on how the situation with Tencent will evolve. Despite this adjustment, Kepler analysts noted that the overall valuation of the group remains inexpensive, but the current uncertainties necessitate a more conservative outlook for the company's stock.
InvestingPro analysis reveals the company maintains strong financial health with a current ratio of 4.11, though it trades at elevated multiples with an EV/EBITDA of 199.8x. Subscribers can access 8 additional ProTips and comprehensive valuation metrics to better assess the investment opportunity.
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