DigitalGlobe Leads Morgan Stanley's Top Biz-Education Stock Picks
In a report published Wednesday, Morgan Stanley analyst Denny Galindo named the top picks in the Business and Education Services coverage as DigitalGlobe Inc (NYSE: DGI), Servicemaster Global Holdings Inc (NYSE: SERV) and Moody's Corporation (NYSE: MCO) and maintained an Overweight rating on all three.
DigitalGlobe is benefiting from selling capacity from its newest satellite, which was launched in 2014, and a new satellite planned to be launched in mid-2016. Analyst Denny Galindo expects the company's revenue run rate to increase in 4Q16 by about 30 percent from the 1Q15 levels, with the inking of higher priced deals with existing Direct Access Program (DAP) customers and Location Based Services companies.
"We expect strong operating leverage to lead to higher margins while small, cash flow accretive acquisitions could emerge as positive catalysts as DGI deploys $250-300M in FCF (no M&A modeled)," Galindo said. DigitalGlobe's shares, which are currently trading at a discount of about 20 percent to mature satellite companies contract wins and deal announcements could boost the shares. The price target for DigitalGlobe has been maintained at $39.
Referring to ServiceMaster, the report said, "We remain bullish due to the stability in the pest market, high incremental margins, and the opportunity for American HomeShield to become a larger part of the business." The price target has been raised from $39 to $42.
Moody's revenues could accelerated with increasing corporate maturities in 2016 and 2017, with maturing debt being refinanced. "However, we could see near term turbulence if the fed increases rates this year," Galindo wrote. The price target has been maintained at $126.
Latest Ratings for DGI
|Jul 2016||JP Morgan||Maintains||Neutral|
|May 2016||Morgan Stanley||Downgrades||Overweight||Equal-Weight|
|Feb 2016||Chardan Capital||Downgrades||Buy||Neutral|
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