Morgan Stanley on Thursday cut communication software stocks' price targets to incorporate more cautious long-term growth outlook and higher underlying rate environment.
"Q2 checks were more positive than stock performance would imply, but market appetite for profitability feeds the bears," analyst Meta Marshall wrote in a Q2 preview note.
- Twilio ( NYSE: TWLO ) PT slashed to $160 from $240 (potential upside of 88% to last close) to reflect market focus on profitability and cash generation. It reaffirmed its Overweight rating as it expects encouraging signs in H2 of cross-sell.
- Five9 ( FIVN ) PT cut to $120 from $160 (potential upside of 30.6% to last close) to account for a more conservative free cash flow multiple. It reiterated its Overweight rating, saying it expects FIVN to continue outperforming peers as high customer retention limits reliance on new business.
- RingCentral ( RNG ) PT slashed to $75 from $105 (potential upside of 49.2% to last close). It maintained its Equal-Weight rating, citing lower relative investor appetite, current market risk environment and lack of catalysts.
- Bandwidth ( BAND ) PT cut to $22 from $38 (potential upside of 25% to last close) to incorporate slightly higher equity risk premium. It reaffirmed its Equal-Weight rating on competitive concerns.
- NICE ( NICE ) PT reduced to $235 from $260 (potential upside of 20.2% to last close) to account for lower comparable cloud multiples in the market. It remains Equal-Weight on the stock as it lacks a catalyst for now.
- 8x8 ( EGHT ) PT cut to $6.50 from $11 (potential upside of 38% to last close) to take into account slightly higher interest rate/risk premium environment. It maintained its Equal-Weight rating as Q2 is a limited catalyst.
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Morgan Stanley cuts communication software stocks PT on cautious growth outlook