BofA raises Kone price target on service strength despite new build challenges

BofA Securities raised its price target on Kone OYJ (KNEBV:FH) to EUR63.00 from EUR61.00, maintaining a Buy rating, based on expectations of strong performance in Kone's modernization and service segments, leading to a 2-3% increase in estimates. Despite challenges in the new build segment and tariff-related uncertainty in the U.S., BofA anticipates limited direct cost impacts from tariffs and projects stabilization in the Chinese market by the end of 2025, supporting Kone's growth and margins.

Analysis

BofA Securities has upgraded its price target for Kone OYJ (KNEBV:FH) to EUR63.00 from EUR61.00, reiterating a Buy rating, driven by an anticipated robust performance in Kone's modernization and service segments which led BofA to revise its estimates for Kone upwards by 2-3%. While acknowledging headwinds in Kone's new build segment and uncertainty stemming from U.S. tariffs which have prompted wide corporate guidance ranges, BofA projects that direct cost implications from these tariffs will be minimal. Furthermore, BofA's analysis indicates a stabilization in the crucial Chinese market, with a potential trough foreseen by the end of 2025, suggesting subsequent recovery. Consequently, the price target for Kone's American Depositary Receipt (ADR KNYJY) has also been lifted to $35.99 from $34.72. The sustained Buy rating is underpinned by the resilience of Kone's aftermarket operations, seen as safeguarding growth and margins, and the assessment that concerns regarding China are already incorporated into current financial projections; however, the article also notes that InvestingPro's AI algorithms did not identify KNEBV as a top undervalued stock.

Key Decisions for Investors

• Investors could view BofA's revised price target and maintained Buy rating as a positive signal, supported by anticipated strength in Kone's modernization and service segments.
• It is prudent to monitor Kone's new build segment performance and the actual impact of U.S. tariffs, as these represent potential headwinds despite BofA's assessment of limited direct tariff cost impact.
• Consider the long-term potential from the projected stabilization of the Chinese market by late 2025, but also acknowledge that other analytical tools, such as InvestingPro's AI as mentioned in the article, have not flagged Kone OYJ as a top undervalued opportunity, warranting diversified research.