On Wednesday, JPMorgan (NYSE:JPM) maintained its Overweight rating on shares of MSCI Inc . (NYSE:MSCI) and increased the company's price target to $620 from the previous $590. The firm highlighted MSCI's stature as a top-tier compounder with a strong presence in the index data, investment analytics, and ESG information sectors.
MSCI, recognized for its Index unit's leadership in international equity indices and benchmarking, has approximately $15.6 trillion in assets under management (AUM) benchmarked to its indices as of December 2023. The firm emphasized that over two-thirds of this AUM is actively managed, showcasing MSCI's modular and research-driven index creation and its commitment to client-focused innovation.
In 2010, MSCI's acquisition of RiskMetrics marked its entry into the environmental, social, and governance (ESG) space. Since then, MSCI has significantly expanded its ESG business. Today, it stands as the foremost provider of ESG ratings and a leader in ESG & Climate indices. MSCI is also focused on growing its ESG & Climate franchise and scaling its Private Assets data business.
JPMorgan underscored MSCI's exceptional performance within the Information Services sector, noting its best-in-class organic revenue growth, high margins, and strong free cash flow conversion. These fundamentals are further supported by MSCI's demonstrated ability to deploy capital effectively and the flexibility of its business expenses.
In other recent news, MSCI Inc. reported a solid financial growth in its second quarter of 2024, with a 12% rise in adjusted earnings per share and a notable 10% organic revenue growth. The company also highlighted a robust subscription run rate growth of 14%, with a retention rate of nearly 95%.
RBC Capital maintained its Outperform rating on MSCI shares, recognizing the company's accelerated growth in the second quarter of 2024, which was attributed to a 200 basis points quarter-over-quarter improvement in retention and a 22% rise in new recurring subscription sales.
Despite potential challenges in the near term, such as increased cancellations and typically weaker sales in the third quarter, MSCI's effective strategy and consistent pricing are expected to drive subscription growth to low double digits over the mid-term. The financial services firm projects that estimates for MSCI may be adjusted upwards as the company continues to meet targets for net new recurring subscription sales.
These are recent developments and reflect the company's focus on capturing long-term trends in the investment industry. MSCI's strategic initiatives and product launches align with these trends, positioning the company to capitalize on various growth opportunities. The company is optimistic about its long-term growth prospects despite challenges in the asset management industry.
InvestingPro Insights
JPMorgan's confidence in MSCI Inc. is mirrored by several key metrics and analyst sentiments tracked on InvestingPro. With a substantial market capitalization of $42.32B, MSCI's robust financial performance is reflected in a high P/E ratio of 35.92, indicating investor optimism about the company's earnings potential. The company's impressive revenue growth over the last twelve months, at 14.72%, aligns with JPMorgan's recognition of MSCI's top-tier status and its strong organic growth.
InvestingPro Tips highlight that MSCI has not only maintained but also increased its dividend payments for 11 consecutive years, underlining the company's commitment to returning value to shareholders. Moreover, four analysts have revised their earnings estimates upwards for the upcoming period, suggesting a positive outlook for MSCI's financial performance.
For readers looking to delve deeper into MSCI's investment potential, InvestingPro offers additional tips; for instance, there are 10 more InvestingPro Tips available that provide further insights into the company's stock performance and projections.
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