Canaccord: Synacor's Exposure To AT&T Softened By Recurring Revenue Growth

A slowdown in AT&T Inc. (NYSE: T) engagement has lowered Synacor Inc. (NASDAQ: SYNC)'s revenue prospects, but new investments and growth in recurring revenue segments will limit the downside, according to Canaccord Genuity. 

The Analyst

Michael Graham of Canaccord Genuity downgraded Synacor from Buy to Hold and cut the stock’s price target in half from $6 to $3.

The Thesis

AT&T, for whom Synacor is the portal provider, has seen a decline in its portal and advertising business as the company seeks to prioritize customer engagement over monetization, Graham said in a Thursday note. 

This change led to Synacor management to reduce its 2018 AT&T contribution target from $100 million to $33 million, cutting into revenue and EBITDA guidance, the analyst said. 

Recurring revenue continues to strengthen as fee-based segments such as the Cloud ID ad video platform experience growth, Graham said. 

Synacor is expected to continue investing in Cloud ID and Zimbra email, which will grow recurring revenue and limit downside from the company’s AT&T exposure, according to Cannacord. 

Price Action

Synacor was down 14.63 percent at the close Friday.

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