UBS cuts Soitec to "sell" as photonics optimism looks overdone

Tower Semiconductor

Today 09:08

** UBS downgrades French semiconductor materials group Soitec SOIT.PA to "sell" from "neutral", saying the stock's valuation increasingly reflects an "overly optimistic revenue growth trajectory"
** Soitec shares have surged more than 400% this year as investors bet on its exposure to AI-driven silicon photonics
** UBS expects Photonics-SOI to reach about 25% of revenue by 2028, while the rest of its business, accounting for 84% of 2026 revenue, is seen growing at a more modest 14% CAGR over 2026-2030
** "While Photonics is expected to grow at ~35% 26-30 CAGR, it remains too small to meaningfully impact group revenues or offset pressures elsewhere", UBS says
** Broker says the market may be overestimating how closely Soitec's growth should track that of downstream customers such as STMicroelectronics STMPA.PA, Tower Semiconductor TSEM.TA, GlobalFoundries GFS.O and TSMC 2330.TW
** UBS says those downstream players should benefit from higher photonic integrated circuit content, while Soitec's silicon-photonics wafer average selling prices are likely to be flat to declining with scale
** "While we remain constructive on the structural Photonics-SOI opportunity, we believe current valuations increasingly reflect an overly optimistic revenue growth trajectory," it says

 (Reporting by Nathan Vifflin in Gdansk)
 ((nathan.vifflin@thomsonreuters.com; +48 58 769 67 13;))