UPDATE: Goldman Sachs Downgrades Advantage Solutions Inc. (ADV) to Neutral

Goldman Sachs analyst Jason English downgraded Advantage Solutions Inc. (NASDAQ: ADV) from Buy to Neutral with a price target of $7.00.

The analyst comments "ADV reported relatively strong 4Q21 results versus our incoming expectation, but issued a weaker EBITDA outlook than we expected, which was accompanied by an even weaker free-cash-flow guide. One tenet of our Buy thesis – that the company would be able to mitigate higher labor costs with the benefit of a higher commission stream on its sales business (from higher CPG prices) and price increases in its marketing business – did not transpire as expected. These benefits instead appear to be covering only half of its cost pressure, in our estimation, and we see no end of that pressure in sight given the tight and inflating US labor market. We lower our EBITDA forecast meaningfully to account for this. And our lower EBITDA is compounded in the cash flow statement by elevated accounts receivables as ADV's customers appear to be extending out their payment terms. We believe the stock is unlikely to outperform our coverage universe until a pathway to improved profits and cash flow emerges. We downgrade the stock to Neutral, from Buy, as a result. Since we added ADV to the Americas Buy List on November 13, 2020, the stock has declined by 35% while the S&P 500 rose 22%."

For an analyst ratings summary and ratings history on Advantage Solutions Inc. click here. For more ratings news on Advantage Solutions Inc. click here.

Shares of Advantage Solutions Inc. closed at $6.50 yesterday.

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