BofA/Merrill Lynch Downgrades Informatica (INFA) to Underperform

October 24, 2014 7:30 AM EDT
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Price: $48.73 --0%

Rating Summary:
    7 Buy, 20 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 22 | Down: 26 | New: 45
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BofA/Merrill Lynch downgraded Informatica (NASDAQ: INFA) from Neutral to Underperform with a price target of $33.00 (from $37.00) following Q3 results which highlight several moving pieces.

Analyst Kash Rangan cites several reasons that make it difficult to be positive: 1) Broad trend of spending shifting to Hadoop, Cloud, Big Data, combined with more IT buyers consuming software as a service may be diverting budgets from legacy vendors such as INFA. 2) Revs growth of ~10% in 2014 is still well below the 20%+ expectation of investors. INFA’s long-term goal is 17% growth, inline with long-term historical performance. In our view, the 17% goal becomes believable if INFA could grow licenses in mid to high teens, we model 3% for 2014E vs organic license growth of 4% over the last couple of years. 4) Despite strong demand for subscriptions-based products, sales investments do not seem to be paying off in verticals such as financials. Increasing shift to subscription revs and increased spend to drive new products/go-to-market initiatives should keep a lid on margins.

The firm cut FY 2014 EPS from $1.55 to $1.54 and bumped FY 2015 EPS from $1.90 to $1.91.

For an analyst ratings summary and ratings history on Informatica click here. For more ratings news on Informatica click here.

Shares of Informatica closed at $32.83 yesterday.

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