On Tuesday, BofA Securities adjusted its stance on MSCI Inc . (NYSE:MSCI), shifting the rating from Underperform to Neutral. The financial firm also increased its price target for the company's shares to $525, up from the previous $425.
The change in rating comes after a reassessment of the company's valuation in light of recent market movements. BofA Securities believes that the current stock price has factored in an overly pessimistic scenario. Additionally, the potential for share buybacks is seen as a positive influence that could support the stock price going forward.
MSCI experienced a notable decline in its share value following the report of substantial subscription cancellations in the first quarter. Management at MSCI has attributed this downturn to a singular event and unfortunate timing. Despite these cancellations, BofA Securities suggests that the company's fundamentals are more robust than the current stock valuation implies.
However, the analyst anticipates that growth in the near term could be limited. Factors such as a slowdown in ESG safe sales and a lack of strong growth in Index subscription revenue are expected to keep any potential gains in check.
In terms of valuation, BofA Securities notes that MSCI's peers in the Information Services sector are trading at a 32% premium over their 2018 future year multiples, while MSCI's premium stands at only 10%. The revised price objective of $525 is based on a 31.5 times multiple, which is a slight 0.5 times premium compared to its peers, and represents a 21% premium over MSCI's multiple from 2018.
InvestingPro Insights
Following BofA Securities' update on MSCI Inc., a closer look at some key metrics from InvestingPro provides additional context to the company's current position. MSCI's market capitalization stands at $37.79 billion, and the stock is trading at a price-to-earnings (P/E) ratio of 32.32. This P/E ratio, while reflecting a premium valuation, is supported by the company's solid revenue growth over the last twelve months, which is reported at 14.72%. Additionally, MSCI's gross profit margin during the same period is notably high at 82.17%, indicating strong profitability.
InvestingPro Tips highlight that MSCI has raised its dividend for 10 consecutive years, demonstrating a commitment to returning value to shareholders. This is particularly relevant for investors looking for stable income streams. Furthermore, despite some analysts revising their earnings downwards for the upcoming period, MSCI has maintained a consistent dividend payout, with a current dividend yield of 1.34%. For those interested in a deeper analysis, there are 11 additional InvestingPro Tips available, which can be accessed with a special offer: use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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