SoftBank Group Corp. shares look to have limited upside after the rally this month that added more than ¥7 trillion to an all-time high Monday.
Founder Masayoshi Son’s aggressive investment in artificial intelligence, from its $500 billion data center project with OpenAI and Oracle Corp., to growing holdings in Nvidia Corp., drove stellar gains in the stock. However it failed to keep its momentum Tuesday, despite plans to invest $2 billion in Intel Corp., with investors taking profit after a 135% share price gain in just four months.
The shares may have peaked for now, and these three charts show why:
SoftBank’s 14-day relative strength index climbed as far as 90 on Monday, exceeding the threshold that signals the stock might be overbought. It was in the similar territory in February 2024 and again five months later. In both cases sharp declines ensued.
The shares are trading further above analysts’ target prices than at any point since records began in 2010. Past such instances have been followed by the stock losing momentum.
“It suggests the rally is more than just about the fundamental factors,” said Kazuhiro Sasaki, head of research at Phillip Securities Japan Ltd. He noted some investors bought SoftBank shares as they built up exposure to Nikkei 225 Stock Average which reached fresh record this week.
SoftBank now trades at a discount of about 30% to its net asset value per share, compared with 48% at the end of July, making the stock less appealing from a valuation standpoint.
“The shares are overheated in the short-term,” said Angus Lee, a fund manager at Sparx Asset Management who added SoftBank in his portfolio in July, adding that he’s not “super bullish at this point.” Lee said that longer-term the shares are “fairly attractive” due to possible listings of the companies that SoftBank has invested in, but he’s taken profit in the past few days.
This article was generated from an automated news agency feed without modifications to text.
