TaskUs Downgraded at Morgan Stanley On Near-Term Growth Challenges

© Reuters. TaskUs (TASK) Downgraded at Morgan Stanley On Near-Term Growth Challenges

By Sam Boughedda

AiVIF.com - A Morgan Stanley (NYSE:MS) analyst downgraded shares of TaskUs, Inc. (TASK) to Equal-Weight from Overweight, lowering the firm's price target on the stock to $19 from $28 in a research note Monday.

The analyst explained that they are constructive on management's ability to drive improved growth in the medium-term, and while the company's valuation at these levels "remains undemanding," they are mindful of near-term growth challenges driven by client mix and delivery optimization. As a result, they believe the shares will remain rangebound in the coming quarters.

"Directionally consistent with our preview, but definitively worse in magnitude, exposure to challenged end markets of crypto- and equity-trading amidst clients' broader cost reduction efforts is expected to pressure revenue growth for the year, with management expecting CY22 revenue of $930mm–$950mm (vs. $980mm–$1bn prior), implying +23.6 y/y revenue growth at the midpoint, while adjusted EBITDA margin is expected to be 22.3% (vs. 23.0% prior)," the Morgan Stanley analyst wrote..

The analyst added that the company's fintech exposure weighs on revenue growth near term, and the company's management expects revenue exposure to the group to decrease to 5% by 4Q22 as clients in the crypto-trading and equity-trading spaces reduced volumes faster and deeper than previously expected.

"While we are confident in management's ability to reaccelerate growth in the medium-term, softer volumes and tougher compares will drive muted revenue growth near-term, and as such, we are downgrading TASK to Equal-weight as we see shares likely rangebound over the coming quarters. Should volumes meaningfully improve for TASK to drive acceleration in revenue growth near-term, we see potential for multiple expansion as outlined in our Bull Case scenario, added the analyst.