UBS Downgrades Cornerstone OnDemand (CSOD) to Neutral
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UBS downgraded Cornerstone OnDemand (NASDAQ: CSOD) from Buy to Neutral with a price target of $40.00 (from $50.00), saying significant portions of the business not seeing returns.
Analyst Brent Thill commented, "vs. Street -$0.01), CSOD's 4Q16 billings guidance implies material deceleration (-2% y/y compares to +24% in the year ago Q) and reveals substantial go-to-market/execution challenges in 2 places of the business (EU + mid-market) that we believe represent at least ~50% of total revenue. To be clear, we are fans of CSOD's technology and believe that this is purely a go-to-market related issue that will take multiple quarters to iron out – CSOD's EV/Sales multiple could come under pressure in the near to medium term to as low 3x CY17E (~$30/share), and may not expand until issues are dealt with. Despite its leading competitive position in the Talent Management and Learning markets, CSOD is heading into 2017 undergoing sales force restructuring (consolidation of its two mid-market sales teams) – this, coupled with economic uncertainty in Europe (where timing of resolution is at least as unclear as the mid-market situation) bring us to the sidelines through year end and heading into 2017."
Shares of Cornerstone OnDemand closed at $39.35 yesterday.
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