BofA Securities downgrades Equifax stock rating on limited cloud advantage

Investing.com - BofA Securities downgraded Equifax (NYSE:EFX) from Buy to Neutral on Monday, while lowering its price target to $285.00 from $300.00. According to InvestingPro data, the stock currently trades at a P/E ratio of 51.7x, suggesting a premium valuation. Despite the downgrade, 9 analysts have recently revised their earnings expectations upward.

The research firm reduced its 2025 adjusted EPS estimates to $7.58 from $7.63 and its 2026 estimates to $8.91 from $9.22, reflecting tempered growth expectations for the credit reporting agency. The company maintains strong fundamentals with a 56.4% gross profit margin and has consistently paid dividends for 55 consecutive years.

BofA Securities cited three key factors behind its downgrade decision, with the primary concern being that Equifax’s transformation to a cloud native platform does not represent a long-term competitive moat for the company.

The firm noted that Equifax’s future growth would instead depend on product innovation leveraging its unique data assets, which the company expects will drive growth back to its unrevised long-term outlook.

BofA Securities also highlighted that a mortgage market recovery would be the "real kicker" to Equifax’s growth prospects, suggesting the company’s performance remains partially tied to housing market conditions.

In other recent news, Equifax has made significant strides in its technological and product offerings, as well as receiving favorable analyst evaluations. The company has completed over 90% of its cloud transformation, a development that has prompted Stifel to increase its price target for Equifax to $295, maintaining a Buy rating. RBC Capital also reaffirmed an Outperform rating, emphasizing the company’s ability to grow through its advanced cloud and data infrastructure, which is expected to drive innovation in areas such as AI solutions. UBS reiterated a Buy rating with a $315 price target, citing Equifax’s solid long-term growth framework of 8-12% and its capacity for agile product innovation.

Equifax has also introduced a new AI-powered tool called Optimal Path, designed to offer consumers personalized credit score improvement plans by analyzing individual credit profiles. This tool is part of Equifax’s strategy to leverage its cloud capabilities and EFX.AI technology to provide actionable insights for consumers. Furthermore, the company has set ambitious long-term financial targets, including a 2030 earnings per share goal of $15, which could increase to $19 with a potential recovery in the mortgage market.

Despite sector concerns impacting companies like Fair Isaac (NYSE:FICO), Equifax’s recent developments and strategic initiatives have positioned it well for future growth. Analyst firms have noted that Equifax’s focus on cloud transformation and data-driven solutions could enhance its market penetration and competitive edge. These recent developments highlight Equifax’s ongoing commitment to leveraging technology for growth and innovation.

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