Nomura upgrades Rakuten stock to Buy on mobile growth prospects

Nomura/Instinet upgraded Rakuten Inc. (4755:JP) from Neutral to Buy, raising its price target to JPY1,085.00 from JPY902.00, citing increased confidence in Rakuten Mobile's service revenues aligning with medium-term expectations and improved financial risk management. The upgrade incorporates a shift in the valuation base year to December 2028 and a significant revaluation of Rakuten's AST SpaceMobile holdings to ¥203.0 billion. While highlighting the pace of mobile sales growth as a key focus, Nomura also noted potential risks from the upcoming KDDI roaming contract renewal in September 2026.

Analysis

Nomura/Instinet has upgraded Rakuten Inc. to Buy from Neutral, increasing its price target to JPY1,085 from JPY902. This upgrade is underpinned by several key factors, starting with increased confidence in Rakuten Mobile's ability to meet medium-term service revenue targets. The valuation methodology has been adjusted by shifting the base year forward to December 2028, allowing the model to capture anticipated EBITDA growth from the mobile segment. Furthermore, the analysis highlights Rakuten's improved financial risk management, evidenced by increased internally generated funding and a clear strategy for managing its debt, including retail bond redemptions in H1 2025 followed by new issuance. A significant contributor to the revised valuation is the substantial upward revaluation of Rakuten's stake in AST SpaceMobile, which Nomura now values at ¥203.0 billion, a sharp increase from the previous estimate of ¥106.9 billion. Despite the bullish outlook, the pace of sales growth in the mobile service segment remains a key variable to monitor, alongside the potential risk associated with the renewal of its roaming service contract with KDDI, scheduled for September 2026.

Key Decisions for Investors

• Consider the Nomura upgrade as a significant positive catalyst, as the revised JPY1,085 price target is supported by an improved outlook for the mobile division, stronger financial management, and a substantial revaluation of its AST SpaceMobile holdings.
• Investors should closely monitor Rakuten Mobile's upcoming subscriber and service revenue growth figures to validate the thesis that the segment's performance is aligning with medium-term expectations.
• Factor in the potential risk associated with the renewal of the KDDI roaming service contract set for September 2026, as its terms could materially impact the mobile segment's future cost structure and profitability.