The Evercore Story Is Bigger Than Qualcomm, Says Bullish UBS Analyst

Despite Evercore Inc EVR's heavy reliance on QUALCOMM, Inc. QCOM, a UBS analyst said the company can continue to grow and diversify. 

The Analyst

UBS analyst Brennan Hawken upgraded Evercore from Neutral to Buy and increased the price target from $82 to $105.

The Thesis

Evercore's pipeline, which has more than doubled since October, is likely to continue to grow, Hawken said in a Tuesday note. (See the analyst's track record here.) 

Fifty-four percent of Evercore's pipeline is tied to Qualcomm, "representing some risk," Hawken said. But the analyst said Evercore company can circumvent this issue, as it has meaningful leverage to large deals.

While UBS said it remains concerned that the ISI deal has not been value-accretive, the headwinds from the business are not enough to offset Hawken's positive M&A outlook, he said. 

"Further, we continue to view that franchise as well-suited to a subscription model, which would be positive for margins and overall profitability." 

UBS sees Evercore as a premium franchise at a reasonable multiple compared to its historic average and as one that's at a discount when adjusted for the new tax rate, given the rapid expansion in the pipeline and Evercore's positive outlook.

UBS raised its 2018 earnings per share estimates from $5.05 to $6 and for 2019 from $5.35 to $6.70, citing the lower tax rate and an improved outlook on following passage of U.S. tax legislation.  

The Price Action

Evercore shares are up more than 27 percent over the past year.

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