Morgan Stanley remains Overweight Nuix despite fresh downgrade
The market may have lost confidence in Nuix, but Morgan Stanley remains optimistic.
Despite a disastrous IPO and a string of downgrades, Nuix (ticker: NXL) still has its backers.
Morgan Stanley, the storied investment bank, yesterday reiterated their Overweight rating on the stock and a 12-month price target of $7.50 per share.
Should we get back to those levels, current buyers would be looking at significant upside. In the current environment however, the ‘should’ in that sentence is doing a lot of lifting.
The past is no predictor of the future, nor are there any guarantees around the accuracy of investment bank price targets.
Yesterday we ran through the story of Nuix thus far. You can read it here. For those without the time, Nuix – which is an investigative analytics and intelligence software company – sprung to market with high hopes last year.
The stock at one point traded close to $12 per share off the back of lofty expectations and a juiced up IPO roadshow. Management said they were on track to hit revenues of $191.3 million for the full-year. Then they said they weren’t. And then they said they definitely weren’t.
The current expectations are for full-year revenues of between $173 million to $182 million. FY21 EBITDA is expected to come in at between $64.6 to $66.6 million.
Morgan Stanley did point out that while revenue guidance was only lowered by the low single digits, the response by the market, which saw the stock sold down close to 20% yesterday, was hardly surprising.
According to the investment bank this is ‘because a 2nd downgrade in two months points to the difficulty NXL is having forecasting it’s own revenue base at this point.’
Not to mention that Nuix management left the door open for further amendments to this guidance, saying:
'The revised forecasts are susceptible to a number of risk factors relevant between now and 30 June 2021, including final customer negotiations of productions and license types, timing of deals and potential FX rate variable.'
Ultimately, while Morgan Stanley’s positive view of the sector remains (industry view: attractive) as well as the company's longer term growth profile, this string of downgrades have highlighted elevated uncertainty in the name.
‘The risk profile surrounding NXL equity value, has moved meaningfully wider…and we expect the shares reflect a discount to intrinsic value until confidence is restored.’
Confidence in the short-term is certainly down. The stock didn’t rebound today as is often the case, though it also didn’t continue falling. As of 2:37 PM Nuix traded at $2.78 per share, up 0.36% for the session.
At those levels the stock is down 67% since January, when hopes were high and the future seemed certain.
Trade Nuix long and short with IG today
Create an IG account or log in to your existing account to get started now
The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.