FOCS - Focus Financial Partners started as Underweight at Morgan Stanley on rising yields

• Focus Financial Partners ( NASDAQ: FOCS ) stock slid 2% in Tuesday premarket trading after Morgan Stanley analyst Ryan Kenny started coverage of the wealth manager with an Underweight rating.
• Kenny pointed out that FOCS share performance is inversely correlated with rising 10-year Treasury yields ( US10Y ), "reflecting its use of debt to fund acquisitions and net leverage ratio range of 3.5-4.5x," he wrote in a note to clients.
• Take a look at the poor relationship between FOCS and the 10-year yield, on a YTD basis, in this chart .
• And as the company looks to achieve a higher level of acquisition activity in 2022, that "raises near-term dilution risk," as it will likely need to raise more debt or equity to fund its deal pipeline, Kenny said.
• Kenny's Underweight rating agrees with the Quant's Sell rating, but diverges from average Wall Street rating of Buy.
• Previously, (Aug. 4) Focus Financial Partners Non-GAAP EPS of $1.18 beats by $0.08, revenue of $539.2M beats by $14.78M .

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