Can Yageo's Stock Price Return to 1,000? Is the Rally Just an Exit Opportunity? Investor Reveals the 'Real Reason' Behind Two Foreign Brokerages Cutting Target Prices

Taiwan's stock market continues to experience high volatility in August. On Tuesday (5th), following a strong rally in all four major U.S. indices, Taiwan's weighted index surged 1,250.94 points, reclaiming the 44,000-point mark. The stock of Yageo (2327), a leading passive components manufacturer, also rose sharply.

However, this morning (6th), the finance-focused Facebook page "Trader Ashun" analyzed recent downgrades to Yageo's target price by Goldman Sachs and Citigroup. Notably, both brokerages maintained their "Buy" ratings. The analyst emphasized that investors must understand the underlying reasons, stating that this situation is not contradictory.

On August 5, Taiwan's weighted index closed at 44,611.60 points, up 2.88%, regaining both the monthly and quarterly moving averages and marking the 11th-largest point gain in Taiwan's stock market history. Reviewing recent market trends, volatility persists—after plunging approximately 4,900 points over five trading days from late July to early August, the index rebounded nearly the same amount within just four sessions. Market sentiment shifted rapidly from panic to optimism, with daily trading volumes consistently exceeding one trillion NT dollars, indicating swift capital rotation and heightened short-term fluctuations. During this correction phase, Yageo was among the hardest-hit AI-related stocks in the Taiwanese market.

Looking at Yageo's recent stock performance, it reached a historical high of around 1,220 NT dollars in early July. However, within less than a month, its price plummeted from 1,220 to 502 NT dollars (on July 31), a cumulative decline of about 58.9%, nearly halving its value. In August, however, Yageo's stock began to recover—closing at 552 NT dollars on August 3, 583 NT dollars on August 4, and reaching an intraday high of 618 NT dollars on the 5th, closing at 608 NT dollars. Over just four trading days, it gained approximately 21%, becoming one of the strongest performers in the current market.

"Many people assume that when foreign brokerages lower a target price, it means the company is deteriorating," said Trader Ashun. But he stressed the importance of understanding the real reasons behind such moves. The changes in target prices by the two brokerages were as follows:

Goldman Sachs: Reduced from 1,490 to 1,280 NT dollars Citigroup: Reduced from 1,500 to 1,450 NT dollars

At first glance, this appears pessimistic. However, Trader Ashun pointed out that neither brokerage has negated Yageo's long-term competitiveness—both continue to rate it as "Buy." Therefore, what was revised downward is not the company itself, but the valuation the market is willing to assign. Months ago, the market assigned Yageo a very high P/E ratio because investors believed that AI demand, MLCC (multilayer ceramic capacitors—one of the most widely used passive components) price increases, and inventory restocking would trigger a new economic cycle. But as the market calms down, it's not that belief in AI has disappeared—it's that investors are now questioning whether such a high P/E ratio is justified if growth rates fall below expectations.

"Investing isn't about looking at stock prices—it's about examining the distance between price and value!" Trader Ashun further explained that Citigroup still expects Yageo's profits to grow but has revised its P/E multiple down to 35x. Goldman Sachs anticipates a higher probability of MLCC price increases but has lowered its revenue and EPS forecasts. Crucially, neither brokerage has changed its long-term outlook on AI. He concluded that this is not a sign of weakening fundamentals, but rather the market gradually correcting overly optimistic expectations back to reasonable levels.

For investors holding Yageo going forward, he listed three key indicators, emphasizing that target price adjustments by foreign brokerages should not be the primary focus—"A stock price correction does not necessarily mean the company's value has vanished!" The three critical indicators are:

- Is AI demand continuing to grow? - Can MLCC price increases be successfully passed through to profitability? - Will the company's EPS continue to grow over the next two years?

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