Tuesday - Evercore ISI initiated coverage on MSCI Inc . (NYSE:MSCI) with an Outperform rating and set a price target of $690. The firm believes that the stock's current price-to-earnings (P/E) ratio, which stands at approximately 35 times, underestimates the company's potential for organic subscription revenue growth.
According to Evercore ISI, the estimated sub-10% organic subscription revenue growth rate is not reflective of MSCI's actual growth trajectory. The firm anticipates a cyclical inflection point that will lead to a reacceleration of organic growth in the Index segment between 2025 and 2026.
The expected growth is projected to trigger a re-rating of the P/E multiple to 36 times. This adjustment is anticipated to unlock approximately 20% upside potential for MSCI's stock value. Based on this analysis, Evercore ISI has added MSCI to its Best 'Core' Ideas List.
The firm's outlook suggests confidence in MSCI's ability to outperform the market expectations and deliver significant growth in the coming years. The addition of MSCI to Evercore ISI's select list of core investment ideas underscores the firm's positive view on the stock's future performance.
In other recent news, MSCI Inc. has seen significant developments. The company reported a 12% rise in adjusted earnings per share and a 10% organic revenue growth for the second quarter of 2024, bolstered by a mid-teens increase in net new recurring subscription sales.
MSCI also announced the appointment of Michelle Seitz, a seasoned industry professional, as an independent director on its board. Concurrently, MSCI director Chirantan "CJ" Desai resigned, with no disagreements with the company's operations, policies, or practices stated as the reason for his departure.
Financial analysis firms have shown confidence in MSCI's prospects. RBC Capital maintained an Outperform rating on MSCI shares, while Argus upgraded its price target for MSCI to $600 from $520, reflecting the company's consistent double-digit sales and earnings growth. JPMorgan (NYSE:JPM) also held an Overweight rating on MSCI shares and increased the company's price target to $620.
These firms anticipate continued growth for MSCI, despite potential challenges such as increased cancellations and typically weaker sales in the third quarter.
InvestingPro Insights
Recent data from InvestingPro adds weight to Evercore ISI's bullish stance on MSCI Inc. The company's revenue growth of 15.03% over the last twelve months as of Q2 2024 supports the notion of strong organic growth potential. Moreover, MSCI's impressive gross profit margin of 82.08% and operating income margin of 53.72% for the same period demonstrate the company's operational efficiency and profitability.
InvestingPro Tips highlight MSCI's consistent dividend performance, having raised its dividend for 10 consecutive years and maintained payments for 11 years. This track record of shareholder returns aligns with the company's financial strength and could contribute to investor confidence.
While Evercore ISI projects a P/E multiple of 36 times, it's worth noting that MSCI's current P/E ratio stands at 38.41, with an adjusted P/E of 42.36 for the last twelve months as of Q2 2024. This suggests that the market may already be pricing in some of the growth expectations.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips that could provide further insights into MSCI's investment potential.
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