Skip to main content

Market Overview

Switch's Guidance Shortfall Prompts JPMorgan Downgrade

Switch's Guidance Shortfall Prompts JPMorgan Downgrade

Data center designer and technology infrastructure company Switch Inc (NYSE: SWCH)'s second-quarter earnings report and disappointing guidance prompted JPMorgan to drop its bullish stance. 

The Analyst

JPMorgan's Richard Choe downgraded Switch from Overweight to Neutral with a price target lowered from $17 to $13.

The Thesis

Switch reported Monday afternoon with an in-line earnings report but lowered its 2018 guidance, Choe said in the downgrade note. (See the analyst's track record here.)

The company's sales forecast revision implies mostly flat revenue and margin performance from a year ago — which is disappointing, as Switch was expected to show a revenue ramp and margin improvement, the analyst said. 

Switch did report a record backlog of large deals in the pipeline and a very low churn rate of less than 0.1 percent, Choe said.

The data center company's growth appears to have been delayed to 2019 or beyond, which should have investors positive on the company's long-term strategic vision the analyst said. Investor concern with elevated spending should ease as new campus openings ramp capital expenditure down to $65 million per quarter, or $260 million annually, which Choe said is favorable compared to expectations of $265 to $310 million in 2018.

Switch's growth story and long-term favorable outlook remain unchanged, although a shift away from a bullish stance on the stock is warranted at this time due to slower growth, according to JPMorgan. 

Price Action

Switch shares were plunging 27 percent to $10.20 at the time of publication Tuesday.

Related Links:

What Started In Vegas Isn't Staying In Vegas: Switch Goes Global

Data Center Operator Switch's Business Model Snags Vote Of Confidence From Stifel

Photo courtesy of Switch. 

Latest Ratings for SWCH

Mar 2021Raymond JamesDowngradesStrong BuyOutperform
Feb 2021Truist SecuritiesInitiates Coverage OnBuy
Jan 2021JefferiesUpgradesHoldBuy

View More Analyst Ratings for SWCH
View the Latest Analyst Ratings


Related Articles (SWCH)

View Comments and Join the Discussion!

Posted-In: Data CenterAnalyst Color Earnings News Downgrades Price Target Top Stories Analyst Ratings Best of Benzinga

Latest Ratings

NIUDaiwa CapitalInitiates Coverage On41.5
QMCONorthland Capital MarketsInitiates Coverage On12.0
IBKRJefferiesInitiates Coverage On89.0
MRETFTD SecuritiesDowngrades18.5
SWKSGoldman SachsDowngrades135.0
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