Morgan Stanley Downgrades Bright Horizons (BFAM) to Underweight on Changing Work Habits

(Updated - April 7, 2021 7:38 AM EDT)

Morgan Stanley analyst Toni Kaplan downgraded Bright Horizons (NYSE: BFAM) from Equalweight to Underweight with a price target of $150.00 (from $153.00), saying changing work habits could present downside risk to BFAM's employer based model.

"BFAM's employer based Full Service business is 6x the size of the next competitor and this sticky, high quality revenue with a long growth runway is a key reason why BFAM trades at the premium multiple that it does (27x '22 EBITDA, highest in our Diversified Business Services coverage)," the analyst commented. "However, with the potential for changing on-site work dynamics post COVID, we think this could result in daycare becoming more local to employee homes and lead to increased competition for BFAM. This may pressure top-line growth and drive multiple contraction for
BFAM's valuation that has recovered to pre-COVID levels."

The firm sees a muted recovery in Full Service revenue, with their '22Full Service revenue 5% below the '19 level. This leads the firm to be 4% below consensus on ’22rev and 9% below on ’23.

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

Shares of Bright Horizons closed at $178.29 yesterday.

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