MS cuts Sinch to 'underweight,' sees market expectations as too high
30/01/2023 14:40
** Morgan Stanley cuts Swedish cloud communications
specialist Sinch SINCH.ST to "underweight" from "equal
weight," saying the stock's re-rating after better-than-expected
Q3 results "has gone too far"
** The shares, which have gained about 150% between
pre-release of the Q3 print and Friday's close, trade at a
premium to market leader Twilio TWLO.N , it says
** Meanwhile, MS argues that market expectations on the
group's pricing power, gross profit and EBITDA growth are
unrealistic
** The brokerage sees "significant uncertainty" around
Sinch's Q4 results as a large number of acquisitions it made in
Q4 account for about 60% of the group's current gross profit
base
** It expects the group to struggle to accelerate organic
growth whilst expanding margins, particularly in a challenging
macro environment
** MS' forecasts sit about 7% below consensus for FY2023
adj. EBITDA and 20% below consensus for the same in FY 2025
** Given the highly competitive nature of the business Sinch
operates in, the brokerage views the company's pricing power as
limited
** Shares in Sinch were down 12.5% on Monday, on track for
their worst day since October 24, when they closed 16.3% lower
** The company will report Q4 results on Feb. 16
(Reporting by Louise Breusch Rasmussen)
((Louisebreusch.rasmussen@thomsonreuters.com))