MSCI Downgraded: Analyst Highlights ESG Sales Slowdown And Persistent Political Headwinds
Portfolio Pulse from Lekha Gupta
Raymond James analyst Patrick O'Shaughnessy downgraded MSCI Inc (NYSE:MSCI) to Market Perform from Outperform, citing a slowdown in ESG & Climate sales and persistent political headwinds. Sales in this segment through the first three quarters of 2023 were $31 million, compared to $52 million in 2022 and $43 million in 2021. The analyst expects these headwinds to continue through at least 2024 and projects revenue growth in the ESG & Climate segment to decelerate to 17% in 2024. Index subscription growth is also expected to fall below 10% in 2024. Despite these challenges, MSCI is still seen as a strong business with high barriers to entry and recurring revenue models. The analyst predicts ETFs linked to MSCI indices will see about $50 billion in net inflows in 2023, which is a decrease from $55 billion in 2022. Adjusted EPS estimates for Q4 and FY24 were raised slightly due to strong market performance.
January 05, 2024 | 5:42 pm
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MSCI Inc was downgraded by Raymond James due to a slowdown in ESG & Climate sales and political headwinds, with lower projected revenue growth and index subscription growth for 2024. Adjusted EPS estimates for Q4 and FY24 were raised slightly.
The downgrade by a prominent analyst due to a slowdown in a key sales segment and political challenges is likely to negatively impact investor sentiment in the short term. The lowered growth projections for the ESG & Climate segment and index subscription growth are significant factors that could lead to a decrease in stock price. However, the slight increase in EPS estimates might mitigate the impact slightly.
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