On Thursday, RBC Capital maintained its Outperform rating on shares of MSCI Inc . (NYSE:MSCI) with a steady price target of $638.00. The firm's analysis acknowledged the challenging comparison with non-recurring revenues and anticipated a moderation in recurring subscription growth. This expectation stems from a decrease in net new sales observed in the first quarter of 2024.
The report highlighted that, despite the slower sales, assets under management (AUM) have seen solid growth in the quarter to date. This growth is expected to contribute to a low double-digit or higher percentage increase in asset-based fees (ABF) revenue. The focus for investors remains on new recurring subscription sales, especially for the Index service, which experienced a 5% drop in the previous quarter. Concerns were noted regarding potential elongation of the sales cycle and budget constraints among clients.
Nevertheless, RBC Capital underscored the strength of MSCI's sales pipeline and the firm's effective engagement with clients as positive signs for future performance. While near-term cyclical headwinds were acknowledged, the firm emphasized that the long-term secular trends for MSCI remain strong, supporting the rationale behind the Outperform rating. The analysis concluded without any change to the previously established price target, indicating confidence in the company's ongoing strategy and market position.
In other recent news, MSCI Inc. has reported robust financial results for the first quarter of 2024, announcing a 10% organic revenue growth, a 12% increase in adjusted earnings per share, and a 14% rise in free cash flow. Despite market challenges and volatility, the company managed to achieve record assets under management (AUM) in ETFs and non-listed products linked to its indices.
In the realm of analyst ratings, Goldman Sachs (NYSE:GS) maintained its Neutral stance on MSCI, citing cyclical pressures and a decrease in revenue visibility as potential factors affecting the stock's performance. On the other hand, Redburn-Atlantic upgraded MSCI stock from Sell to Neutral, with a revised price target of $485, reflecting the firm's confidence in the company's management abilities to address current challenges. Similarly, BofA Securities upgraded its rating on MSCI from Underperform to Neutral, raising its price target to $525.
These recent developments indicate a cautious yet optimistic outlook for MSCI, with a focus on the company's revenue growth prospects and strategic focus areas.
Despite the anticipated challenges in the sales environment for the second quarter, MSCI management forecasts a recovery in the latter half of 2024, driven by a decrease in market volatility, growth in AUM, and a resurgence in buy-side confidence. The company also plans to continue investing in long-term growth opportunities, including product innovation in custom indices, ESG products, and private assets.
InvestingPro Insights
InvestingPro data and tips shed further light on MSCI Inc.'s financial health and market performance. With a robust market capitalization of $39.48 billion, MSCI is trading at a P/E ratio of 33.95, which reflects investor sentiment about the company's earnings potential. The company has shown a healthy revenue growth of 14.72% over the last twelve months as of Q1 2024, underpinning the positive outlook from RBC Capital.
Two noteworthy InvestingPro Tips for MSCI Inc. include the company's consistent increase in dividend payments, with a dividend growth of 15.94% over the last twelve months as of Q1 2024, and a solid track record of raising dividends for 10 consecutive years. Additionally, MSCI has maintained dividend payments for 11 consecutive years, demonstrating its commitment to returning value to shareholders. These factors may appeal to investors looking for steady income in addition to growth potential.
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