On Thursday, Wolfe Research raised its rating on shares of MSCI Inc . (NYSE:MSCI) from Peerperform to Outperform. The stock has shown strong momentum, trading near its 52-week high with significant price appreciation over the past six months, according to InvestingPro data.
The firm's analyst pointed to an anticipated more favorable demand environment in financial services and capital markets for the upcoming year as a key factor for the upgrade. This optimistic outlook is expected to contribute to steadier sales trends and a reduction in cancellations, particularly within the Analytics segment.
The analyst also cited the potential for another positive year in the markets, which could act as a tailwind for MSCI's Index Asset-Based Fee (ABF) revenue. Moreover, the growth in custom indices is believed to have the potential to re-accelerate subscription growth for the Index segment.
Despite headwinds faced by Environmental, Social, and Governance (ESG) subscription growth, the analyst noted that outflows from U.S. sustainable funds are diminishing. This trend suggests a possible stabilization in negative sentiment towards ESG investments.
Moreover, the analyst highlighted that growth in Climate subscription services could continue to support revenue growth within the segment. This perspective suggests confidence in the resilience and potential expansion of MSCI's climate-related product offerings despite broader challenges in the ESG space. For investors seeking deeper insights, InvestingPro offers 8 additional key tips and a comprehensive Pro Research Report, providing valuable analysis of MSCI's market position and growth potential.
The upgrade reflects Wolfe Research's positive outlook on MSCI's ability to capitalize on market conditions and trends in the financial sector. The firm's analysis suggests that MSCI is well-positioned to benefit from these developments in the coming year.
In other recent news, MSCI Inc. has reported impressive financial results for Q3 2024, despite market pressures. The company's total revenue grew by 16%, with adjusted earnings per share up by 12% and free cash flow increasing by 46%. In addition, MSCI repurchased $199 million worth of shares, bringing the total to $440 million for the year.
These developments have been accompanied by nearly 20% asset-based fee revenue growth, a 15% increase in subscription run rate, and a 94% retention rate. Record assets under management in ETFs and non-ETF products reached $18.6 billion in ETF cash flows for the quarter.
Despite a cyclical downturn in ESG and Climate services, MSCI raised its CapEx guidance by $10 million and increased free cash flow guidance by $80 million for 2024. Management remains committed to strengthening leadership in ESG and private credit sectors for long-term growth. However, it is worth noting that challenges persist, such as elevated cancellation activity and longer sales cycles, which are expected to continue impacting retention rates.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.