BofA Downgrades Rockley Photonics After Withdrawal From Chinese Joint Venture

Rockley Photonics Holdings Ltd RKLY has withdrawn from a telecom application related to a joint venture with a Chinese customer that found its way into the U.S. government’s entity list, according to BofA Securities.

The Rockley Photonics Holdings Analyst: Vivek Arya downgraded the rating on Rockley Photonics Holdings from Buy to Neutral, while reducing the price target from $14 to $6.

The Rockley Photonics Holdings Thesis: Although the joint venture opportunity was not core to the company’s healthcare sensing chip business, “we believe the announcement today enhances the risks in RKLY’s core operations,” Arya said in the downgrade note.

The withdrawal from the joint venture also “potentially increasing the need for some additional financing in CY22 to meet product ramp requirements for CY23/24,” the analyst added.

“We continue to like RKLY’s unique healthcare chip focus, and potential to engage with large strategic consumer and healthcare companies. However, the risk reward appears more balanced to us,” he indicated.

Arya reduced the sales estimates for 2022 from $72 million to $27 million and for 2003 from $390 million to $300 million, “to reflect possibility of slower product ramps and lumpy customer buying patterns.”

RKLY Price Action: Shares of Rockley Photonics Holdings had plummeted by around 20% to $4.20 at the time of publication Wednesday.

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