SoftBank Group, the Japanese technology investor, is anticipated to report a return to losses in its upcoming earnings release on Monday, despite a robust performance by its key asset, Arm Holdings, and other technology stocks during the quarter.
Investors and analysts eagerly await insights into SoftBank’s strategy for new growth investments, given its substantial liquidity and potential monetization opportunities from its sizable holding in Arm.
While Arm Holdings experienced significant share price growth in February, SoftBank’s financial performance does not directly benefit from this as Arm remains a subsidiary. However, SoftBank’s other listed assets, such as Coupang and DoorDash, witnessed mixed performances, with some stocks rising while others, like DiDi Global and Grab Holdings, declined.
The subdued initial public offering (IPO) market further complicates the monetization prospects for SoftBank’s portfolio of unlisted tech startups, leaving analysts uncertain about future earnings potential.
SoftBank is projected to record a net loss of 72 billion yen ($462.70 million) for the January-March quarter, in contrast to the 985 billion yen net profit reported in the previous quarter.
Although SoftBank’s management has expressed readiness for new growth investments, they remain cautious. While new investments were limited in the October-December quarter, analysts suggest that a significant acquisition akin to the Arm purchase in 2016 could be on the horizon.
SoftBank could potentially fund up to $30 billion for such an investment through various means, including its liquidity, bond proceeds, and leveraging its Arm stake. However, the dominance of the Arm stake within SoftBank’s portfolio poses risks, particularly if market sentiment shifts unfavorably.
Despite Arm’s premium valuations, analysts warn of potential overvaluation, with some suggesting a fair value significantly lower than its current trading price. Disappointing revenue forecasts from Arm’s recent quarterly earnings underscore the volatility and uncertainty surrounding its future performance, which could impact SoftBank’s overall valuation and fundraising capabilities.
As investors await SoftBank’s earnings report, attention remains focused on the company’s ability to navigate market fluctuations and capitalize on potential growth opportunities while mitigating risks associated with its diverse portfolio.