Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Morgan Stanley remains Overweight Nuix despite fresh downgrade

The market may have lost confidence in Nuix, but Morgan Stanley remains optimistic.

Morgan Stanley remains Overweight Nuix despite fresh downgrade Source: Bloomberg

Despite a disastrous IPO and a string of downgrades, Nuix (ticker: NXL) still has its backers.

Optimism

Morgan Stanley, the storied investment bank, yesterday reiterated their Overweight rating on the stock and a 12-month price target of $7.50 per share.

Should we get back to those levels, current buyers would be looking at significant upside. In the current environment however, the ‘should’ in that sentence is doing a lot of lifting.

The past is no predictor of the future, nor are there any guarantees around the accuracy of investment bank price targets.

Yesterday we ran through the story of Nuix thus far. You can read it here. For those without the time, Nuix – which is an investigative analytics and intelligence software company – sprung to market with high hopes last year.

The stock at one point traded close to $12 per share off the back of lofty expectations and a juiced up IPO roadshow. Management said they were on track to hit revenues of $191.3 million for the full-year. Then they said they weren’t. And then they said they definitely weren’t.

The current expectations are for full-year revenues of between $173 million to $182 million. FY21 EBITDA is expected to come in at between $64.6 to $66.6 million.

Morgan Stanley did point out that while revenue guidance was only lowered by the low single digits, the response by the market, which saw the stock sold down close to 20% yesterday, was hardly surprising.

According to the investment bank this is ‘because a 2nd downgrade in two months points to the difficulty NXL is having forecasting it’s own revenue base at this point.’

Not to mention that Nuix management left the door open for further amendments to this guidance, saying:

'The revised forecasts are susceptible to a number of risk factors relevant between now and 30 June 2021, including final customer negotiations of productions and license types, timing of deals and potential FX rate variable.'

Pessimism

Ultimately, while Morgan Stanley’s positive view of the sector remains (industry view: attractive) as well as the company's longer term growth profile, this string of downgrades have highlighted elevated uncertainty in the name.

‘The risk profile surrounding NXL equity value, has moved meaningfully wider…and we expect the shares reflect a discount to intrinsic value until confidence is restored.’

Confidence in the short-term is certainly down. The stock didn’t rebound today as is often the case, though it also didn’t continue falling. As of 2:37 PM Nuix traded at $2.78 per share, up 0.36% for the session.

At those levels the stock is down 67% since January, when hopes were high and the future seemed certain.

Trade Nuix long and short with IG today

Create an IG account or log in to your existing account to get started now

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Tuesday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.