On Tuesday, Morgan Stanley (NYSE:MS) analysts revised their stance on Nexi (BIT:NEXII) SpA (NEXI:IM), downgrading the stock from an Equalweight to an Underweight rating. Accompanying the downgrade, they also reduced the price target to €4.75 from the previous €7.15. The change in rating reflects concerns over the company's future revenue growth prospects.
The analysts pointed to a combination of factors that could impact Nexi's performance in the financial year 2025 (FY25), including softening volume growth and continued pricing pressure. They anticipate these elements will present significant challenges for the company's net revenue growth in FY25. Morgan Stanley's forecast for growth in the Merchant Solutions segment is notably more conservative than the current consensus, projecting a slowdown to 5.0% in constant currency terms compared to the consensus expectation of a reacceleration to 8%.
At the group level, Morgan Stanley expects around 4% organic growth, which is below the 5% consensus among industry analysts. Their more cautious outlook extends to Nexi's margin expansion in FY25, suggesting that the expected lower growth could impact profitability.
The analysts also commented on Nexi's valuation, noting that it is currently trading at approximately 8 times the CY25e adjusted Price to Earnings (P/E) and around 8% Free Cash Flow Yield (FCFF). They believe that this valuation does not fully reflect the risks associated with the company's growth in FY25, leading to the decision to downgrade the stock to a relative Underweight position.
The downgrade and new price target are based on Morgan Stanley's analysis and expectations for Nexi's performance in the coming years, specifically focusing on FY25. The revised outlook by Morgan Stanley suggests that investors may need to recalibrate their expectations for Nexi's financial performance and stock valuation in light of the anticipated challenges.
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