CITI REITERATES SELL RATING ON ELEKTA STOCK AMID PRICING SHIFT

Citi reiterated its Sell rating on Elekta (EKTAB:SS) with a SEK39.00 price target after the company announced a SEK4.9 billion order backlog cancellation. While Elekta is shifting its strategy to prioritize pricing discipline over market share, Citi anticipates continued market share loss to Varian and identifies multiple headwinds to Elekta's adjusted EBIT margin, including FX, R&D, and tariffs. Citi notes a potential disconnect with Infront consensus expectations, which still project margin improvement despite these challenges.

Analysis

Citi has reiterated its Sell rating on Elekta AB (EKTAB:SS) with a SEK39.00 price target, following the company's announcement of a substantial SEK4.9 billion order backlog cancellation and its decision not to update mid-term targets during a recent presentation. This coincides with a notable strategic pivot by Elekta, which is now prioritizing pricing discipline over its historical pursuit of unit market share "at any cost," focusing instead on mid-term growth and margin drivers. While Citi acknowledges this shift could potentially benefit margins, the firm anticipates continued market share erosion to competitor Varian and raises concerns that the increased focus on pricing might further constrain Elekta's top-line growth. Significant headwinds to Elekta's adjusted EBIT margin are projected for fiscal years 2025 and 2026, including an approximate 100 basis point negative impact from foreign exchange, a further 100 basis point headwind from research and development expenditures, and a roughly 50 basis point drag from tariffs. This cautious outlook, underscored by a "strongly negative" sentiment signal from associated data, contrasts with Infront consensus expectations, which still forecast a 10 basis point year-over-year improvement in Elekta's margins, indicating a potential misalignment between market perception and the company's fundamental challenges.

Key Decisions for Investors

• Investors should exercise caution regarding Elekta, considering the reiterated Sell rating, substantial order cancellation, and identified margin pressures from FX, R&D, and tariffs.
• Monitor Elekta's execution of its new pricing discipline strategy closely, particularly its impact on market share relative to Varian and overall revenue generation, given the company did not update its mid-term targets.
• Scrutinize the divergence between Citi's pessimistic margin outlook and the more optimistic Infront consensus, as this gap represents a key risk if market expectations prove too high and Elekta fails to navigate the identified headwinds.