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Luxoft's Uncertainty Will Continue; Cowen Downgrades

Luxoft's Uncertainty Will Continue; Cowen Downgrades
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Luxoft Holding Inc (NASDAQ: LXFT) announced Tuesday its fiscal third quarter results, which included an earnings per share beat and a miss on the revenue line. The company slashed its sales outlook for the year from $920 million to a range of $900 to $905 million and its EPS outlook was also lowered.

The Analyst

Cowen's Avishai Kantor downgraded Luxoft Holding's stock from Outperform to Market Perform with a price target lowered from $63 to $50.

The Thesis

Luxoft's revised guidance to the downside can be attributed to meaningful contraction in revenue from its top two clients who account for 34 percent of total revenue, Kantor said in a note. It appears the company's business is "getting worse, not better" as expectations ahead of the earnings was for the company to show growth in new verticals and incremental contributions from other clients to mitigate the "significant revenue pressure."

The earnings report also makes it difficult to determine what mix of Luxoft's portfolio boasts healthy near-term growth prospects, so investors shouldn't come to expect a rebound in the stock in the near-term.

A more appropriate longer-term revenue growth objective for Luxoft would be 15 percent as opposed to a prior 20 percent target, Kantor said. In fact, the company's EBITDA margin guidance was lowered from 15.5 to 16.5 percent to a new range of 15.0 to 15.2 percent, which implies expectations for an "elongated recovery" in margin to a 17 to 19 percent range.

Price Action

Shares of Luxoft were trading lower by more than 14 percent at $45.70.

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Latest Ratings for LXFT

Feb 2018Credit SuisseMaintainsNeutralNeutral
Feb 2018KeyBancMaintainsOverweightOverweight
Feb 2018Cowen & Co.DowngradesOutperformMarket Perform

View More Analyst Ratings for LXFT
View the Latest Analyst Ratings

Posted-In: Avishai Kantor Cowen information technology softwareAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


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