Oxford Instruments: Hold Rating Maintained Amid Strategic Shift and Quantum Business Sale

Jefferies analyst David Farrell maintained a Hold rating on Oxford Instruments (OXINF – Research Report) today and set a price target of p2,230.00.

David Farrell has given his Hold rating due to a combination of factors surrounding Oxford Instruments’ recent strategic decisions. The company’s announcement to sell its quantum business, Nanoscience, aligns with CEO Tyson’s strategy to concentrate on higher volume throughput businesses that can achieve manufacturing efficiencies. While the sale is expected to improve Oxford Instruments’ margins by approximately 200 basis points before accounting for stranded costs, and about 100 basis points after, the quantum business had a low-margin and capital-intensive revenue profile, which made it less attractive in the near to mid-term.
Additionally, the disposal price of £57 million is favorable when compared to the sum-of-the-parts valuation, where the quantum business accounted for a significant portion of the Advanced Technology division’s revenue. Although the sale is likely to lead to a positive reaction in the share price due to the planned return of £50 million to shareholders, some of the innovative appeal of the investment may have been diminished. These considerations have led David Farrell to maintain a Hold rating on the stock, reflecting a balanced view of the potential upsides and downsides following the transaction.