On Tuesday, Citi updated its outlook on OneConnect Financial Technologies Co. (NYSE: OCFT), adjusting the stock's price target to $7.00, a slight increase from the previous $6.98. The firm continues to recommend a Buy rating for the company's shares. The adjustment reflects Citi's revised non-IFRS earnings forecasts for the years 2024 through 2026, which incorporate anticipated gains from the divestment of Pacific Alliance Bank (PAOB) in 2024.
The revision in earnings estimates is based on the expectation of a substantial one-time gain from the PAOB divestment in 2024, as well as the management's goal for OneConnect to potentially reach a breakeven point that same year. The new earnings projections are set at Rmb6 million for 2024, Rmb53 million for 2025, and Rmb136 million for 2026.
The Discounted Cash Flow (DCF) analysis now suggests a target price-to-earnings (P/E) ratio of 14.5 times for the year 2026. The firm's decision to maintain a Buy rating is based on what it perceives as an excessively penalized valuation of OneConnect's stock.
OneConnect, a technology-as-a-service platform for financial institutions, has been under the scrutiny of investors seeking growth opportunities within the fintech sector. The company's stock performance and future earnings potential are of particular interest, especially in light of the strategic divestments and management's financial targets.
Investors and market watchers will likely monitor OneConnect's progress toward its stated financial goals, including the impact of the PAOB divestment on its earnings and the company's pursuit of a breakeven point in 2024. The updated price target from Citi provides a reference point for the market's expectations of OneConnect's financial trajectory.
InvestingPro Insights
As OneConnect Financial Technologies Co. (NYSE: OCFT) aims for a breakeven point in 2024, investors are keenly observing the company's financial health and stock performance. With a current market capitalization of approximately $2.55 billion, OneConnect is navigating through challenging financial waters.
InvestingPro data indicates that OneConnect holds a Price / Book multiple of just 0.22 as of the last twelve months ending Q4 2023. This low multiple could suggest that the company's assets are potentially undervalued in the market, aligning with Citi's perspective of an excessively penalized valuation. Additionally, the company's aggressive share buyback strategy, as highlighted in one of the InvestingPro Tips, may reflect management's confidence in the company's value proposition and future prospects.
OneConnect's revenue has seen a decline of 17.84% over the last twelve months as of Q4 2023, which could be a point of concern for investors looking for growth. However, the company's strong cash position, with more cash than debt on its balance sheet, provides a cushion that could support its strategic initiatives and potential recovery.
For investors interested in deeper analysis and more InvestingPro Tips on OneConnect, including insights on valuation, profitability, and price performance, you can explore further at https://www.investing.com/pro/OCFT. There are a total of 13 additional tips available on InvestingPro that could provide a comprehensive understanding of OneConnect's position within the Software industry. To gain access to these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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