Clarivate stock holds as analyst backs Sector Perform rating

On Wednesday, RBC Capital revised its outlook on Clarivate Plc (NYSE:CLVT), decreasing the price target from the previous $8.00 to $7.00. The firm maintained its Sector Perform rating on the stock. The adjustment comes amid concerns about the company's recent CEO change, a deceleration in subscription growth, and persistent challenges in recurring and transaction revenues.

The company's stock performance is expected to continue to be affected by these factors. While there are some positive aspects, such as easier comparisons to previous performance metrics, the timing of patent fee increases, and a few minor victories, RBC Capital remains cautious. The firm expressed skepticism regarding Clarivate's second-half 2024 organic growth forecast, which anticipates less than 2% growth.

This forecast is contingent on a significant uptick in the fourth quarter, driven by a turnaround in nonsubscription revenues. However, the analyst noted that the visibility into this revenue stream is limited and that macroeconomic uncertainties could significantly influence the outcome. The analyst's statement highlighted the need for Clarivate to consider substantial changes to its portfolio or to explore strategic alternatives to navigate through the current challenges.

The report reflects the firm's analysis of the potential impact of recent events on Clarivate's financial performance and stock valuation. The implications of the CEO transition, growth slowdown, and revenue headwinds are factored into the revised price target, signaling caution to investors about the company's near-term prospects.

In other recent news, Clarivate Plc announced a leadership transition alongside its Q2 2024 financial results. Jonathan Gear, the outgoing CEO, will be succeeded by Matti Shem Tov, former CEO of ProQuest, expected to continue driving growth and product innovation.

The company reported Q2 revenue of $650 million, a net loss of $317 million, and an adjusted diluted EPS of $0.20. Despite macroeconomic challenges in the life sciences and healthcare segment, Clarivate noted growth in academia and government subscriptions and improvements in the intellectual property segment.

These developments come with a revised full-year outlook expecting flat growth, with transactional revenues anticipated to improve in the second half. The company reaffirmed its full-year guidance with expected organic growth in the lower half of the range. Increased capital spending by $30 million was also reported, aimed at organic growth, balanced with a capital allocation strategy including share repurchases and mergers and acquisitions.

Clarivate also discussed the launch of new products such as the Epidemiology Intelligence platform and the positive turnaround at Derwent with expanded search capabilities. Despite lower than expected subscription growth in life sciences and IP segments due to macroeconomic factors and product challenges, the company remains optimistic about its future growth.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.