Stifel’s Shlomo H. Rosenbaum downgraded the rating for FactSet Research Systems Inc. (NYSE: FDS) from Buy to Hold, while suspending the price target. He mentioned that the company’s organic growth is likely to decelerate going ahead.
FactSet’s performance is likely to be impacted by tougher public market conditions, which would result in a slowdown in organic growth and potential multiple contraction, analyst Shlomo Rosenbaum mentioned.
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Key Reasons For Downgrade
Rosenbaum mentioned the main reasons for the downgrade as:
- Light revenue over the past couple of quarters
- Pushout of purchasing decisions, indicating the tougher environment. While deals may close, “we are concerned about further deal cycle extensions and the impact of potential further headcount reductions, particularly on the Sell side and within the hedge fund community,” the analyst wrote.
- Increase in user count by only 331 in the quarter, representing the weakest sequential user count increase in ten quarters
- Revenue impact of larger customers having contract minimums and headcount adjustments may be yet to come
- “Given the lack of disclosure around incremental Portware revenue, we find it impossible to defend against the claim that organic revenue is decelerating but that FDS purchased a fast-growing business that is boosting the growth near-term,” Rosenbaum stated.
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