Excessive Bullishness Takes Its Toll On Yaskawa As Reality Comes Home To Roost

When I last wrote about Yaskawa (OTCPK:YASKY) in April, I thought the market and sell-side analysts were far too willing to buy into management’s story that the worst was over in the factory automation market. I thought that because Yaskawa had seen a severe drop in its Chinese business, but weakness had yet to really manifest in the U.S. and Europe. A quarter later, the shares are down about 15%, Yaskawa has another quarterly miss in the books, and the outlook is still pretty shaky.

To be clear, I still like Yaskawa as a company, but I have some serious reservations about the stock even after this correction. Management’s unwillingness to lower guidance after a sizable first quarter miss raises the risk of a bigger readjustment/correction, and I’m concerned that excessively high expectations on the part of management will lead to worse-than-necessary margin pressures from excess capacity. I still think the shares are overvalued by about 10% to 15%, and I’d note that commentary on the auto and semiconductor sectors still isn’t very positive.

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Excessive Bullishness Takes Its Toll On Yaskawa As Reality Comes Home To Roost