FactSet Research Systems (FDS) organic annual subscription value softened quarter-over-quarter amid challenging macroeconomic conditions, but optimism surrounds the company's outlook due to signs of improvement in sales pipelines, increased client trials, and a surge in request-for-proposals, UBS Securities said in a note emailed Friday.
Trials rose 23% in the Americas and 13% in Europe, while request-for-proposals increased 30%, reflecting growing client interest.
The wealth segment is expected to see double-digit growth in fiscal 2025, and the managed services segment continues to gain traction as clients prioritize cost-of-ownership benefits, according to the note.
"Management is seeing early traction with genAI products, which should deliver approximately 30 to 50 basis points of annual subscription value growth in fiscal 2025," UBS added.
The firm said it raised its fiscal 2025 earnings estimate slightly, citing higher revenue expectations driven in part by mergers and acquisitions, and forecast about 5% annual subscription value growth for the full year.
The firm also highlighted challenges in FactSet's core buy-side client base, which may limit the potential to return to its historical 7% growth rate.
UBS also raised its fiscal 2025 adjusted operating margin forecast slightly, to 36.8%, and noted steady price realization despite lower CPI posing a headwind to pricing.
UBS maintains a neutral rating on FactSet's stock and a price target of $525.
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