(Bloomberg) -- SoftBank Group Corp. shares just reached a new high this year, propelled by a series of buybacks that have seen the stock recoup the losses suffered during the coronavirus market rout.
The stock rose 2.6% on Friday to 5,778 yen ($54), the highest since July 2019. That’s more than double the level of a March low.
The recovery is something of a vindication for CEO Masayoshi Son, who unveiled plans to sell 4.5 trillion yen of assets to reduce debt and bankroll record share buybacks. Son has frequently complained that SoftBank’s shares, even at their peak, trade at less than the value of its portfolio of investments.
SoftBank has also had a series of wins over the same period, finally solving the puzzle of Sprint Corp. and T-Mobile Inc. with their merger completed in April, and seeing a welcome return to successful investment bets as online home-insurance provider Lemonade Inc. surged as much as 86% in its U.S. IPO. Thursday.
“The steps being taken to improve its balance sheet, such as repurchase of its debt, are being recognized,” said Tomoaki Kawasaki, a senior analyst at Iwaicosmo Securities Co.
SoftBank shares have had a volatile run over the past year as portfolio companies such as WeWork ran into trouble and the coronavirus hammered many of its businesses. That triggered a record 1.36 trillion yen operating loss for the last fiscal year. Optimists believe the worst is over for the company.
“After the trillion-yen level writedowns last quarter, it’s not possible that it’ll be worse than that,” said Kawasaki.
Citigroup Global Markets analyst Mitsunobu Tsuruo raised his price target for the stock by 100 yen to 7,200 yen on Wednesday, lifting his expectations for the company’s forthcoming first-quarter earnings and noting that there is “still plenty of room for the shares to advance” given the buybacks and steps to clean up its balance sheet.
SoftBank has already repurchased 500 billion yen of shares based on a resolution adopted March 13, separate to its 2 trillion yen pledge. Under that larger program, it has already formally announced plans to buy 1 trillion yen of buybacks through next March, with Son indicating he hoped to carry out the full amount. Investors can “feel confident” in buying and holding SoftBank shares until the buybacks are 90% done, according to Atul Goyal, senior analyst at Jefferies Group.
Whether the shares can continue their increase depends on future catalysts, Iwaicosmo’s Kawasaki said.
“The shares will need another catalyst that boosts shareholder value, such as the second Vision Fund,” he added.
Son said in May that SoftBank will use its own cash for the second Vision Fund for now, until an improved investment performance attracts outside partners.
(Adds Jefferies comment in fourth-last paragraph)
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