Skip to main content

Market Overview

This Analyst Let Go Of Luxoft Misgivings And Issued An Upgrade

This Analyst Let Go Of Luxoft Misgivings And Issued An Upgrade

A KeyBanc analyst's skepticism surrounding the prospects for custom software development company Luxoft Holding Inc (NYSE: LXFT) was allayed amid an abatement in Luxoft's customer concentration.

The Analyst

KeyBanc Capital Markets analyst Arvind Ramnani upgraded shares of Luxoft from Sector Weight to Overweight with a $66 price target.

The Thesis

The top-2 customer concentration at Luxoft is expected to fall from 35 percent currently and a peak of 60 percent in the second quarter of fiscal year 2015 to the mid-20s in the next 12-18 months, Ramnani said in a Monday note. (See Ramnani's track record here.) 

The reduction is likely to be achieved on the back of deceleration at top-2 accounts and healthy growth in other parts of the business by the end of fiscal 2019, Ramnani said.

The analyst expects high-potential accounts, or HPAs, to contribute 37 percent of revenue and to grow from 2016's 18-percent year-over-year rate to 50 percent. KeyBanc projects some of the top talent from Deutsche Bank AG (USA) (NYSE: DB) and UBS Group AG (USA) (NYSE: UBS) will be redeployed to its Luxoft's HPAs to propel growth at smaller accounts.

Shares of Luxoft are trading at a significant discount to EPAM Systems Inc (NYSE: EPAM)'s valuation, according to KeyBanc. The firm expects the discount to compress as overall customer concentration reduces.

KeyBanc estimates Luxoft's 2018 revenues at $923.6 million and earnings per share of $2.87, below the consensus. For fiscal 2019, KeyBanc is below-consensus, with revenue and EPS estimates at $1.07 billion and $3.59, respectively.

KeyBanc sees a significant slip at Deutsche Bank or UBS in the near term or a further slowdown in HPAs as the risks to its thesis.

The Price Action

Dragged by a steep sell-off in early August following the release of first quarter results, Luxoft shares are down about 10 percent year-to-date.

Related Links:

Few Surprises With This Tech ETF

The Technology Stocks You Should Be Investing In Today

Latest Ratings for LXFT

Jan 2019BerenbergDowngradesBuyHold
Jan 2019JP MorganUpgradesUnderweightNeutral
Nov 2018VTB CapitalUpgradesHoldBuy

View More Analyst Ratings for LXFT
View the Latest Analyst Ratings


Related Articles (LXFT)

View Comments and Join the Discussion!

Posted-In: Arvind Ramnani KeyBanc Capital Markets softwareAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

ACVAJefferiesInitiates Coverage On45.0
DSEYJP MorganInitiates Coverage On17.0
PTONB of A SecuritiesMaintains150.0
LVTXJefferiesInitiates Coverage On23.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at