Key Points
Thats thanks to a gain on its stake in T-Mobile USA Inc. and rising valuations for startups in its Vision Fund portfolio..
Arm, with its outsize share of SoftBanks NAV, has effectively replaced Alibaba Group Holding Ltd. as the crown jewel in the firms portfolio..
We think the market is overly discounting NAV broadly, even more so now since the recent Arm move to the upside and the T-Mobile option exercise, while shares have continued to climb in value"The current level of discount implies the market continues to see NAV as highly susceptible to fluctuations in Vision Fund private company valuations or the tech sector having a material downside in public names both contrary to what one might expect from what could be an improving interest rate environment in the near-to-medium term"Raised price target to 8,050 from 7,750..
Vision Fund losses are narrowing, while overall valuation gains and losses on non-listed companies were at breakeven for the September quarterWhile economic sentiment has been stagnant, trends in market interest rates have been positive for corporate valuations, notably the decline in discount rates used to evaluate enterprise value"Similar to the Alibaba agreement, over half of T-Mobile shares from the option agreement can be used for structured finance for imminent monetization at the point of stock provisionRaised price target to 7,300 from 7,100..
Profit boost from T-Mobile shares stops short of anything more sustainable, nor does it signal a higher possibility of share buybacks"Consensus expects high earnings growth from Arm, but its profit could still be small and might not move the needle, given SVFs swingy pre-tax income of 61 billion in 1Q and losses of 259 billion in 2Q"SoftBank mobile remains a stable recurring-profit contributor amid a steady recovery of its mobile business ..
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