Credit Suisse Downgrades Cornerstone OnDemand (CSOD) to Neutral
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Credit Suisse downgraded Cornerstone OnDemand (NASDAQ: CSOD) from Outperform to Neutral with a price target of $35.00 (from $50.00) following Q4 guide lower on FX, Brexit and restructuring.
Analyst Michael Nemeroff commented, " Q3 was generally in line with lowered expectations but CSOD mgmt highlighted new operational sales headwinds that caused them to lower billings expectations in Q4 by ~$35M due to deal slippage b/c of Brexit (~$11M), a restructuring of its mid-market sales (~$18M), and FX (~$6M). Given CSOD's irregular execution track record over the last 2-3 years, we believe its shares could trade lower (they troughed at ~3x EV/Sales after the first execution speed bump in 2014), and remain relatively depressed for an extended period of time, which is why we lower our rating to Neutral. Because this is CSOD's second time in the execution penalty box in as many years the road back to investors' good graces could take a little longer than the last time. However, CSOD shares could be buoyed by the inevitable speculation that the company might be acquired or taken private, given the scale of the business and the recent, sharp upturn into adjusted net profits. The potential for a takeover/take private deal could provide CSOD shares with an additional multiple point above the 3x Ev/Sales multiple we think it would have likely traded in the NT, which is why our target is based on a 4x EV/Rev multiple on our 2017 rev growth estimate of 12%."
Shares of Cornerstone OnDemand closed at $39.35 yesterday.
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