Philips tumbles over 6% after lowered JP Morgan rating

Philips (PHIA.NL) shares are losing more than 6% today as JP Morgan analysts lowered their target price for the Dutch electronics manufacturer's shares and rating to 'Sell'. The company's quarterly report came in better than expected but the bulls failed to resist the rising supply. The company is still grappling with the implications of a recall of millions of ventilators used to treat sleep apnea due to concerns about the toxicity of materials used in their manufacture. 

Revenues: €5.4 billion vs. €4.98 billion expectations

Earnings per share (EPS): EUR 0.41 vs EUR 0.20 expectations

• Not only quarterly but also full-year results beat earlier forecasts for the company, which was able to meet its own expectations and beat market consensus despite problems in its supply chain;
• Philips said it plans to lay off 6,000 employees to restore profitability (half will be laid off this year, the other half by 2025) and expects stronger demand for products in China in 2023, thanks to the opening of the economy there. The company also intends to simplify its internal organization to improve logistics and patient safety;
• With rising interest rates and inflation, demand for the company's devices could fall this year if the economy fails to avoid a recession. Sentiment was weighed down by surprisingly weak retail sales data from Germany, which could point to strained consumer health in Q1 2023. JP Morgan today lowered its target price for the company from €10.90 to €9 per share;
• Over the past three months, institutions have collectively sold more than 25% of their holdings in the company, and the total number of institutions holding its shares has fallen by almost 6%. Despite the declines, BlackRock increased its 2022 holdings to more than 78.5 million shares from the 63.5 million reported on February 1, 2022 (up nearly 24%). In its next report, investors are likely to focus their attention on Q1 2023 demand data from China.

Philips (PHIA.NL) shares, W1 interval. The company's shares, after a disastrous 2022, are near multi-year lows (2002, 2008, 2011), to which the price has reacted positively each time in the past. Source: xStation5