William Blair Downgrades CoreLogic, But Sees Two Upside Opportunities

Property data, information, analytics and services provider Corelogic Inc CLGX could see its shares slacken in the near-to-medium-term, given its valuation, according to a William Blair note issued Tuesday. 

The Analyst

William Blair analyst Brandon Dobell issued the downgrade note.

The Rating

William Blair downgraded shares of CoreLogic from Outperform to Market Perform.

The Thesis

CoreLogic is likely to benefit from solid execution relative to guidance and a gradual increase in growth rate, as mortgage market comparisons get easier through 2018 and Valuation Solutions Group volumes recover, Dobell said. (See Dobell's track record here.) 

The analyst lowered his revenue, EBITDA and adjusted EPS estimates for 2018 on the basis of mortgage market expectations, expense and interest trneds and a higher correlation between VSG and mortgage unit trends. 

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CoreLogic stock's current valuation, at 12 times William Blair's new 2018 adjusted EBITDA estimate, has tilted the risk/reward more negatively than the other stocks in its coverage universe, Dobell said. 

"With the multiple at an all-time high and recovery expectations built into revenue growth estimates, we see more upside in other companies in our coverage over the next 12 months." 

Two scenarios under which CoreLogic could continue to outperform are: 1) if investor expectations for the VSG/mortgage-related profit growth are lower than William Blair projections and 2) if the mortgage market normalizes in 2018.

Normalization of the mortgage market will reduce earnings volatility and lead to a modest acceleration in growth, Dobell said. 

The Price Action

CoreLogic shares were down 1.41 percent at $46.12 at last check. The stock is up about 25 percent in the year-to-date period, although it has pulled back slightly since mid-October.

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