Morgan Stanley cuts Bright Horizons target to $100, keeps Underweight rating

On Tuesday, Morgan Stanley (NYSE:MS) analysts adjusted their outlook on Bright Horizons (NYSE:BFAM) shares, lowering the price target to $100 from the previous $102 while maintaining an Underweight rating on the stock. Currently trading at $122.63, with a P/E ratio of 61, InvestingPro analysis indicates the stock is trading above its Fair Value. The firm’s analysts cited several concerns that could impact the company’s performance in the upcoming year.

The analysts noted a deceleration in top-line growth, anticipating that 2025 could present challenges for Bright Horizons. While the company has achieved 12.67% revenue growth in the last twelve months, factors contributing to this outlook include pricing headwinds, sluggish enrollment growth, and a lack of significant recovery in utilization rates. These elements are expected to limit the company’s revenue growth, with investors awaiting the next earnings report on February 13.

Morgan Stanley’s analysis suggests that Bright Horizons is likely to guide towards high single-digit (HSD) top-line growth for the 2025 fiscal year, with an approximate 10% growth in earnings per share (EPS). However, this projection falls short of consensus estimates by about 6%. InvestingPro subscribers have access to over 10 additional key insights and detailed financial metrics that could help evaluate this outlook more thoroughly.

The revised price target of $100 reflects the firm’s caution regarding Bright Horizons’ near-term growth prospects. The Underweight rating indicates that Morgan Stanley’s analysts believe the stock may underperform relative to the average return of the stocks that the analysts cover.

Bright Horizons has been facing a challenging environment, and the updated guidance from Morgan Stanley provides investors with a tempered outlook on the company’s financial trajectory in the coming year. The firm’s stance remains unchanged, suggesting that investors should maintain lower expectations for Bright Horizons’ stock performance.

In other recent news, Bright Horizons Family Solutions Inc. has been the subject of several analyst revisions and significant business developments. UBS analysts, led by Joshua Chan, lowered their price target for Bright Horizons from $148.00 to $130.00, maintaining a neutral rating. The firm anticipates the company to report a quarter in line with expectations, with potential for the earnings per share (EPS) for 2025 to outperform the Street’s midpoint predictions, but revenue growth guidance for 2025 could fall slightly below market expectations.

On the business front, Bright Horizons successfully amended its senior secured credit facilities, introducing a new term "B" loan facility totaling $583.5 million. This financial restructuring is expected to provide the company with an improved interest rate scenario, potentially leading to cost savings.

In the wake of a significant decline in the company’s share price, Baird upgraded its stock rating from Neutral to Outperform. The firm highlighted the strong performance of Bright Horizons’ Back-Up Care business and the recovery potential in the Full Service segment as drivers of consolidated growth.

Lastly, BMO Capital Markets revised its stance on Bright Horizons, elevating the stock from Market Perform to Outperform, while lowering the price target to $125 from a previous $137. The firm’s analysis suggests that the recent sell-off in Bright Horizons’ shares presents a favorable moment for investors to consider adding the stock to their portfolios. These are the recent developments surrounding Bright Horizons.

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