On Wednesday, RBC Capital maintained its outperform rating on MSCI Inc . (NYSE:MSCI), with a steady price target of $638.00. The firm's stance comes despite acknowledging lower retention rates and weaker bookings in the third quarter of 2024.
RBC Capital anticipates that the upcoming earnings announcement will serve as a turning point, as they expect improvements in bookings and retention in the fourth quarter of 2024. This optimism is underpinned by the anticipation of enhanced asset manager budgets and new fund formations in 2025.
RBC Capital projects a moderation in organic recurring revenue growth to 8%, attributing this to a deceleration in the growth of Index and Analytics. Nevertheless, they forecast consistent growth in the Environmental, Social, and Governance (ESG) segment. The firm also addressed the recent rally in MSCI's stock, which has been attributed to the emerging markets trade.
According to RBC Capital, MSCI is likely to reaffirm its free cash flow (FCF) guidance and the higher end of its adjusted EBITDA expense guidance. This move is seen as part of MSCI's shift towards an "Upturn playbook," suggesting strategic adjustments in response to market conditions.
Despite the challenges faced in the third quarter, RBC Capital's outlook remains positive, with expectations of a rebound in the company's financial performance. The affirmation of the $638.00 price target reflects confidence in MSCI's strategic direction and its ability to navigate through the current market environment.
In other recent news, MSCI Inc. has seen significant financial growth and strategic developments. The company reported a 12% rise in adjusted earnings per share and a 10% organic revenue growth for the second quarter of 2024, bolstered by a mid-teens increase in net new recurring subscription sales.
MSCI also announced the appointment of Michelle Seitz as an independent director on its board, while director Chirantan "CJ" Desai resigned, with no disagreements with the company's operations, policies, or practices stated as the reason for his departure.
In terms of analyst ratings, Evercore ISI initiated coverage on MSCI Inc. with an Outperform rating and set a price target of $690. Redburn-Atlantic upgraded the MSCI stock rating from Neutral to Buy, setting a price target of $680, based on the company's potential for long-term structural growth. Argus upgraded its price target for MSCI to $600 from $520, reflecting the company's consistent double-digit sales and earnings growth.
These recent developments indicate a positive trajectory for MSCI. While the company faces potential challenges such as increased cancellations and typically weaker sales in the third quarter, financial analysis firms anticipate continued growth for MSCI, underscoring the market's confidence in the company's potential for continued success.
InvestingPro Insights
MSCI's financial metrics and market performance align with RBC Capital's optimistic outlook. According to InvestingPro data, MSCI boasts a robust revenue growth of 15.03% over the last twelve months, with a particularly strong operating income margin of 53.72%. These figures support RBC Capital's expectation of improved performance in the coming quarters.
InvestingPro Tips highlight MSCI's strong market position and financial health. The company has raised its dividend for 10 consecutive years, demonstrating consistent shareholder value creation. Additionally, MSCI is trading near its 52-week high, with a strong return of 22.38% over the last three months, reflecting investor confidence in line with RBC Capital's outperform rating.
While MSCI's P/E ratio of 39.44 suggests a premium valuation, this could be justified by the company's strong financial performance and growth prospects. Investors seeking more comprehensive analysis can access 10 additional InvestingPro Tips for MSCI, providing deeper insights into the company's financial health and market position.
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