FactSet's Transition to Cloud Undervalued by Market, Analyst Upgrade Follows

  • Credit Suisse analyst Kevin Mcveigh upgraded FactSet Research Systems Inc FDS from Neutral to Outperform and raised the price target from $485 to $500, given a ~20% pullback on concerns of a more challenging environment. 
  • Having long admired FactSet, the analyst saw potential multiple expansion with its pivot to the cloud and ability to resume buybacks in H223. 
  • The market is not entirely discounting the cloud-native ecosystem FactSet has enhanced with $100 million in investments driving a data differentiation strategy of the private market and AI structure collecting and APIs/ personalization. 
  • Increased disclosure on its cloud journey and client success at April investor day support the analyst's thesis that FactSet is a key "financial cloud client partner" and benefits from relationships with traditional cloud vendors. This fuels healthier annual subscription value [ASV] growth and margin expansion. 
  • The stock could chart a path like Paychex, Inc PAYX, rerating closer to vertical software platforms like Clearwater Analytics Holdings, Inc CWAN.
  • Price Action: FDS shares traded higher by 0.27% at $413.93 on the last check Thursday.
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