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PowerSchool stock downgraded by Jefferies amid Bain Capital acquisition

EditorEmilio Ghigini
Published 06/10/2024, 04:46 AM
PWSC
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On Monday, Jefferies revised its stance on PowerSchool Holdings Inc. (NYSE: PWSC) stock, shifting its rating from Buy to Hold and adjusting the price target to $22.80, down from the previous $30.00.

This change comes in response to the impending acquisition of PowerSchool by Bain Capital at a price of $22.80 per share. The acquisition price represents a 37% premium over PowerSchool's stock value on May 7, before any merger and acquisition reports emerged in the media.

The deal values PowerSchool at approximately 7 times its next twelve months' (NTM) revenue, which falls within the 7-11 times NTM revenue range observed in recent transactions within the same sector.

Jefferies acknowledges PowerSchool as a top-tier entity in the educational technology field, yet the firm has opted to downgrade the stock.

The rationale behind the downgrade is attributed to the nearing completion of the merger and acquisition narrative, with the agreed acquisition price offering minimal potential growth from its current level.

The acquisition by Bain Capital is significant for PowerSchool, as it underscores the value and premium placed on leading companies in the educational technology space. The deal's terms suggest confidence in PowerSchool's standing and future prospects within the industry.

Investors have seen PowerSchool's share price align closely with the acquisition price, reflecting the market's consensus on the value of the deal.

With the acquisition expected to close, the stock's current trading price offers little room for additional appreciation, as indicated by the adjusted price target.

The market is now observing the final stages of this acquisition process, with the new price target set by Jefferies effectively serving as a marker for the anticipated closing value of PowerSchool shares under the terms of the deal with Bain Capital.

In other recent news, PowerSchool Holdings Inc. has been the focus of significant market developments. The education technology company is set to be acquired by Bain Capital for around $5.6 billion, a deal anticipated to be finalized in the second half of 2024. This proposed acquisition has led to several analyst firms adjusting their stance on the company's stock.

RBC Capital has downgraded PowerSchool from Outperform to Sector Perform, aligning its new price target of $22.80 with the acquisition price proposed by Bain Capital.

Similarly, Needham has downgraded the company's stock from Buy to Hold, and Cantor Fitzgerald has shifted from Overweight to Neutral.

PowerSchool's Q1 revenue was reported at $185.0 million, slightly above consensus, and adjusted EBITDA exceeded expectations by 6.2%.

The company has also integrated AI capabilities into its offerings, closing deals worth approximately $400,000 and building a pipeline nearing $10 million. These are recent developments for PowerSchool, providing investors with key points of interest.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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