Smith & Nephew Shares: Business Underperformance ‘Might Be Difficult to Turn Around’

Smith & Nephew (LON: SN.) shares were in focus on Friday after HSBC downgraded the stock from Buy to Hold, cutting the price target from 1,160p to 1,070p.

In a research note, HSBC analysts said the company’s recently announced 12-point programme under its current chief executive “comes across more convincingly than previous plans,” highlighting that it includes “specific KPIs that directly address the pain points.” 

Analysts suggested that this strategy is more likely to produce gains than previous plans aimed at revitalising the business.

Despite acknowledging the potential for improvement, HSBC flagged ongoing concerns. 

While they noted that Smith & Nephew “trades at a deep discount to peers” and could benefit from the “increasing importance of ASC with a smaller robotic product vs peers,” they cautioned that persistent issues may remain challenging.

The analysts stated: “Although we still believe there is plenty of upside that can be achieved via a successful turnaround of the business, the underperformance, especially in the US knees and hips business, might be difficult to turn around after several years of sequential underperformance.”

Smith & Nephew shares are up around 1.5% so far this year. However, in the last six months, it has dipped by over 6%.