Morgan Stanley Downgrades Hologic on Challenging Near-term Upside

In a report published Monday, Morgan Stanley analyst David Lewis downgraded

from Overweight to Equal-weight and removed their $22.00 price target. Although there is a balanced risk-reward following recent stock appreciation, Lewis noted that Morgan Stanley's “SOTP analysis suggests portfolio optimization may not be the quick fix some investors expect and we see a longer road to value creation.” The analyst reported that the “accelerated pace of institutional change” in capital deployment, portfolio management, executive compensation, and board and management transparency addressed Morgan Stanley's previous concerns and the stock hit their target price of $22.00. Lewis commented on the challenged of near-term upside. The analyst wrote, “Secular market pressures are more significant than we initially believed. New management may need to reinvest in the business to drive strategic growth initiatives, but any strategy is likely a journey not a sprint. At 16x CY14e cash EPS and 11x CY14e EBITDA, Hologic does not trade at a discount relative to peers, and we find it hard to argue for a premium multiple given the low visibility on business pressures.” Shares of Hologic closed at $22.19 on Friday and have traded down as much as 2.827% at $21.58.