On Friday, PowerSchool Holdings Inc. (NYSE:PWSC) experienced a shift in market expectations as RBC (TSX:RY) Capital adjusted its stance on the company's stock. The firm downgraded PowerSchool from Outperform to Sector Perform, setting a new price target to $22.80, up from the previous $22.00. This change follows the recent announcement that PowerSchool has entered a definitive agreement to be acquired by Bain Capital for $22.80 per share in cash, valuing the company at an enterprise value (EV) of $5.6 billion.
The acquisition agreement comes on the heels of earlier, unconfirmed reports that PowerSchool was in discussions with Bain Capital regarding a potential takeover. With the PowerSchool board and the majority of voting shareholders approving the transaction, RBC Capital sees the likelihood of additional bidders emerging as improbable. The deal is anticipated to be finalized in the second half of 2024, pending the satisfaction of customary closing conditions.
RBC Capital's updated price target reflects the acquisition price, aligning with the cash offer per share proposed by Bain Capital. The firm's downgrade to Sector Perform suggests a neutral outlook on the stock, as the agreed acquisition price caps the potential upside for PowerSchool shares.
The closure of the deal is subject to normal closing conditions, and until then, the company will continue to operate in the public market.
In other recent news, PowerSchool Holdings Inc. has been the subject of several significant developments. The education technology company is set to be acquired by Bain Capital for approximately $5.6 billion, a deal anticipated to be finalized in the second half of 2024. This proposed acquisition has led to the company's stock being downgraded from Buy to Hold by Needham, and from Overweight to Neutral by Cantor Fitzgerald.
Furthermore, PowerSchool's Q1 revenue reported at $185.0 million, slightly above consensus, and adjusted EBITDA exceeded expectations by 6.2%. The company has also integrated AI capabilities into its offerings, closing deals worth approximately $400K and building a pipeline nearing $10M.
Analysts from firms such as RBC Capital and UBS have updated their outlooks on the company, adjusting price targets between $20.00 and $25.00. These are the recent developments for PowerSchool, providing investors with key points of interest.
InvestingPro Insights
As PowerSchool Holdings Inc. (NYSE:PWSC) prepares for its acquisition by Bain Capital, investors may find value in considering the company's financial health and market performance. According to real-time data from InvestingPro, PowerSchool's market capitalization stands at $4.56 billion, reflecting the company's substantial size in the education technology sector. Despite a negative P/E ratio of -94.43, indicating that the company has been operating at a loss, the revenue growth over the last twelve months as of Q1 2024 was a solid 12.9%, with an even more impressive quarterly revenue growth of 16.0% for Q1 2024. This growth trajectory suggests that PowerSchool is expanding its market presence and revenue streams, which could be promising for its future under new ownership.
InvestingPro Tips highlight that PowerSchool's stock is currently in overbought territory based on the RSI, which could imply a potential pullback in the near term. Additionally, the company does not pay a dividend, which might be a consideration for income-focused investors. For those interested in a deeper analysis, there are 10 more InvestingPro Tips available for PowerSchool, which can be accessed by visiting InvestingPro. Moreover, users can take advantage of an exclusive offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing a comprehensive investment tool to navigate market changes.
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