UBS downgrades Gartner stock to Neutral on slowing contract value growth

Investing.com - UBS downgraded Gartner (NYSE:IT) from Buy to Neutral on Wednesday, while significantly reducing its price target to $270.00 from $480.00. The stock, currently trading at $243.93, has fallen significantly from its 52-week high of $584.01, with InvestingPro data showing technical indicators suggesting oversold conditions.

The downgrade follows what UBS described as a "large Q2 NCVI miss" that has lowered the near-term trajectory for Gartner’s contract value growth by approximately 100 basis points.

UBS now projects Gartner’s contract value growth to exit 2025 at a 2.5% rate, down from its previous estimate of 5.1%, reflecting a substantial slowdown in the company’s core business metrics.

The investment bank has also reduced its organic growth forecast for Gartner in 2026 to 3% from 6% previously, indicating a more prolonged period of slower expansion for the research and advisory company.

Despite noting that Gartner stock "may have long-term value appeal" at 12 times 2026 estimated EBITDA and 16 times free cash flow, UBS sees "limited near-term upside" as contract value growth is expected to continue slowing through the fourth quarter.

In other recent news, Gartner Inc. reported its first-quarter 2025 earnings, revealing an adjusted earnings per share (EPS) of $2.98, which surpassed analysts’ forecast of $2.75. The company’s revenue met expectations at $1.53 billion. Despite the earnings beat, Gartner faced challenges, including a significant renewal cycle with the US Federal Government, where approximately 40% of contracts were up for renewal, and about half were not renewed. This impacted their Global Technology Sales and Global Business Sales segments due to slower decision-making among clients.

UBS recently lowered its price target for Gartner to $480 from $500, maintaining a Buy rating, citing federal headwinds and a choppier selling environment. UBS also adjusted Gartner’s second-quarter contract value growth projection to 5.9%, below the Street’s 6.3% forecast. Meanwhile, BMO Capital Markets raised its price target for Gartner to $465 from $459, maintaining a Market Perform rating, noting that Gartner’s recent financial results exceeded expectations in terms of margins.

Additionally, Gartner held its 2025 Annual Meeting of Stockholders, where all nominees, including Peter E. Bisson, were successfully elected to the Board of Directors. These developments highlight the ongoing adjustments and strategic decisions Gartner is making in response to market conditions and internal assessments.

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