On Wednesday, BofA Securities adjusted its outlook on MSCI Inc . (NYSE:MSCI), lowering the price target to $425 from the previous $530. The firm has reiterated its Underperform rating on the stock. The revision follows MSCI's challenging first quarter, which saw an elevated number of cancellations and a resultant de-rating of shares.
The analyst from BofA Securities noted that while the first quarter of 2024 is expected to be the low point for MSCI in the near term, with the impacts of the Credit Suisse (SIX:CSGN) and UBS merger largely absorbed, ongoing challenges are anticipated from MSCI's active manager customer base. Consequently, the price objective has been reduced to $425, which corresponds to 26.5 times the revised 2025 earnings per share (EPS) estimate of $16.06, down from the previous forecast of $16.36.
This new valuation multiple is lower than MSCI's average over the past five years but still represents a premium compared to its trading range between 2014 and 2018. The analyst pointed out that while Information Services stocks have seen a general re-rating since 2019, MSCI's re-rating was predominantly fueled by enthusiasm for its ESG offerings. However, for the near term, the ESG business is not expected to be a significant contributor to MSCI's revenue growth.
The firm's stance on MSCI remains cautious, with the Underperform rating unchanged. The lower price target reflects a recalibration of expectations in light of recent developments and the broader industry context.
InvestingPro Insights
Amid the current reevaluation of MSCI Inc. by BofA Securities, recent data from InvestingPro provides a deeper look into the company's financial health and market position. MSCI's market capitalization stands at a robust $35.33 billion, while the company maintains a high P/E ratio of 34.42 based on the last twelve months as of Q4 2023. This high multiple could be indicative of the market's long-term confidence in MSCI's growth prospects despite recent setbacks.
From a profitability standpoint, MSCI has demonstrated resilience with a gross profit margin of 82.34% over the same period, reflecting efficient operations and a strong market position. Furthermore, with an operating income margin of 54.82%, MSCI showcases its ability to translate revenue into profit effectively.
InvestingPro Tips highlight that MSCI has raised its dividend for 11 consecutive years, signaling a commitment to returning value to shareholders. Additionally, the stock is currently trading near its 52-week low, which may present a potential entry point for investors seeking long-term positions. For those looking to delve deeper into MSCI's potential, InvestingPro offers additional insights—there are 12 more InvestingPro Tips available, which can be accessed with the coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
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