Soitec Shares Fall 13% Following Jefferies Downgrade on Overvaluation Concerns

Soitec SA saw its shares tumble more than 13% in Wednesday trading after Jefferies downgraded the French semiconductor substrate producer from "hold" to "underperform" and slashed its price target to €85, nearly 40% below Tuesday's closing price of €140.15.

Jefferies bumped up its price target slightly from €45 to €85, a move driven by a sector-wide re-rating of optical-related stocks. However, the brokerage maintained that even this new level does not justify Soitec's current lofty share price. They emphasize the stock has outpaced what the company's fundamental performance can support.

The research house pegged Soitec's valuation at 19 times forecast fiscal year 2028 EV/EBITDA, aligned with peers' metrics for fiscal 2027. In stark contrast, Soitec currently trades at nearly 34 times fiscal 2027 EV/EBITDA, commanding an 85% premium over the peer group average of 18.3 times, including companies like Coherent at 32.7 times and Lumentum at 29.3 times, cites Bloomberg data.

Under Jefferies' microscope are two segments dragging down revenue. They note RF-SOI wafer inventories with clients including GlobalFoundries remain stuck at 2 million units as of March 2026, flat since December 2025 after falling from 2.5 million in mid-2025, slowing at a quarterly rate of 150,000 to 200,000 wafers. This inventory build-up clouds demand prospects.

The forecast for handset unit shipments looks grim, with Jefferies projecting a 19% decline in 2026 followed by a further 14% drop in 2027, which translates into depressed foundry purchasing activity. Mobile Communications, which generated over half of Soitec's fiscal 2026 revenue, is expected by Jefferies to shrink by 3.5% in fiscal 2027 and then only rebound 9% in fiscal 2028, falling short of consensus views on post-correction recovery.

On the Photonics-SOI front, comprising around 15% of sales, Jefferies pushed back on hopes for strong gains from Co-Packaged Optics (CPO) adoption. They pointed out that Nvidia's latest racks like the NVL72 Oberon and NVL144 Kyber will stick with copper for in-rack connections, reserving CPO for higher-layer switch connectivity in much larger configurations. This dual approach with both copper and CPO may stall rapid expansion of optical connectivity in data centers.

Revenue estimates from Jefferies come in at €630.3 million for fiscal 2027 (6.5% growth) and €734.4 million for 2028 (16.5% growth), which falls 11% short of the market's €824.8 million consensus for 2028. EBITDA forecasts are even more conservative at €171.9 million for 2028, 29% below the usual estimates of €241.4 million.

Competition is another thorn in the side, with Jefferies flagging GlobalWafers' expansion in silicon-on-insulator technology capacity on both 200mm and 300mm wafers, including a new 300mm plant in Missouri supported by U.S. CHIPS Act incentives. Meanwhile, Soitec's gross margin saw a sharp drop to 16.2% in fiscal 2026 versus 32.1% a year earlier, accompanied by a 22.1% operating loss margin, raising questions about profitability.