Shares of EQT AB (ST:EQTAB) fell on Wednesday after UBS downgraded the company’s stock to “sell” from “neutral,” citing valuation risks and concerns over near-term earnings.
At 4:29 am (0829 GMT), EQT AB was trading 2% lower at SEK 352.20.
“On our forecasts, EQT is the most expensive of the European asset managers, at 25.7x 2025E PE, well above the European peer group, and with only a handful of names in the US trading higher,” analysts said,
The downgrade resulted from concerns that EQT’s premium valuation was under pressure due to weaker earnings forecasts, lower expected carried interest, and slower private equity exit activity.
UBS slashed its price target by 7.7% to SEK 300, from SEK 325, driven by lower forecasts for future fund size growth and carried interest.
The brokerage also pointed out that 36% of EQT’s private equity portfolio, worth more than €20 billion, is exposed to risks due to the high concentration in technology, services, and healthcare sectors, sectors that are currently vulnerable to lower valuations.
UBS further noted a potential earnings downside of 12% to 13% if key fund closures, such as EQT XI and BPEA IX, are delayed.
Additionally, exit activity in the private equity market remains subdued, which could force EQT to sell assets below their carrying value, further dampening fund returns and future fundraising efforts.
