SiteMinder shares slip as Jarden downgrades stock
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The news: Shares in SiteMinder lowered on the ASX, paring Wednesday's gains, after Jarden analysts downgraded their rating on the hotel booking company as it approaches a "period of consolidation".
The numbers: SiteMinder shares were down 1.6% to $5.51 by 1:50pm AEST having closed 2.93% higher on Wednesday on the back of its full-year trading update.
Jarden analysts downgraded SiteMinder from 'buy' to 'overweight' and cut their target price on the stock from $6.02 to $5.85.
However, Morgan Stanley reiterated its 'overweight' rating and $6.80 price target. UBS also left its 'buy' rating and $6.65 price target unchanged.
The context: Jarden analysts said that while they are positive on SiteMinder's revenue growth opportunity and ability to scale in the long term, they expect a "period of consolidation" in the short term.
They noted that it would be "strategically sound" for SiteMinder to reinvest its free cash flow (FCF) in revenue growth, after the company reported that underlying FCF turned positive in the second half.
However, this implies downgrades to consensus FCF and a return to SiteMinder's medium-term target of 30% revenue growth "may not be linear", given the pathway there is "somewhat dependent on new product update", they said.
UBS analysts noted that SiteMinder's Q4 earnings came in softer than expected but the company's FY25 outlook beat forecasts. They echoed Jarden analysts' view that while more positive longer term, they expect an increased focus on revenue growth over FCF margin expansion "could place some pressure" on medium-term earnings.
Morgan Stanley analysts said SiteMinder "positively surprised the market" and provided optimism around its sales growth outlook.
"We expect that so long as the business remains self-funding, the market will reward revenue reacceleration, even at the expense of near-term operating leverage," they said.
The sources: Jarden research, UBS research, Morgan Stanley research
