TOKYO, JAPAN – SoftBank Group KK has recently seen a surge in its stock price following strong quarterly results and a substantial increase in the value of its subsidiary. Despite this, some analysts maintain a bearish stance on the company’s stock, citing concerns over its valuation.

In the company’s fiscal Q3, SoftBank reported a return to profitability, with a net profit of ¥950 billion (around $6.36 billion). This was partially attributed to a windfall from the merger agreement between T-Mobile and former Softbank subsidiary Sprint Corp, which accounted for over a third of the quarterly profit. The remainder of the profit came from the Vision Fund segment’s combined $4 billion investment gain.

One of the key concerns for investors is the valuation of Arm Holdings plc, which accounts for about a third of SoftBank’s net asset value. Some analysts believe that the recent surge in Arm’s stock price is not fundamentally justified, raising questions about the sustainability of its current valuation.

SoftBank’s increasing debt, along with upcoming bond maturities and the ongoing challenge of generating cash, pose further concerns for investors. The company’s involvement in a number of high-profile failures, coupled with its strategy of investing in late-stage, high-valuation companies, has led to skepticism among some analysts regarding its long-term prospects.

While some positive developments have been noted, such as the acquisition of free T-Mobile US shares and strong valuation of Arm, concerns about the company’s overall positioning continue to persist. This has led to a reevaluation of the stock’s rating, with some analysts advising caution.

Amidst these challenges, the company’s leadership and governance structure has come under scrutiny, particularly with regards to conflicts of interest and transparency in its deals and transactions. The risks associated with SoftBank’s investments and debt leverage strategy have prompted a reassessment of its future outlook and stock rating.

Overall, while there have been some positive developments for SoftBank, concerns regarding its valuation, debt, and governance structure continue to weigh on the company’s long-term prospects. As a result, some analysts have adjusted their ratings on the stock to reflect the evolving situation.