Waiting For The ‘Clouds‘ To Part; Downgrade to Equal-weight

研报英文原文证据摘录

Waiting For The ‘Clouds‘ To Part; Downgrade to Equal-weight

IdeaMExhibit 2: Moat vs. Journey Quadrant

Source: Morgan Stanley Research

Why is that Not Built into Valuation? NICE shares are down 13%/43% YTD/L12M

(and now back to 2018 levels), driven by a combination of broader multiple

compression across software, downward revisions on profitability / FCF following

the November Analyst Day, and continued investor concerns on incumbent CCaaS

disruption risk. More recently, weakness has been attributable to proactive renewal

actions taken in Q1 with marquee customers, creating a more challenging estimate

setup in FY26 on Cloud revenue and adding fuel to the long-standing bear case.

While we acknowledge much of the near-term downside is likely reflected in the

shares, as the stock is not expensive today (trading at 1.7x EV/2027 Sales and ~8.5x

EV/2027 FCF, a slight discount to the Front Office/Customer Enablement/

Communication Software peer group median at 2.3x/9.4x), we do not yet see a clear

catalyst for multiple expansion over the near-term. Until NICE is able to

demonstrate stronger growth, accompanied by stronger FCF generation, we believe

risk/reward from current levels is likely to remain balanced.

As a Result, We Downgrade to Equal-weight (from Overweight) and Lower Our

PT to $111, based on 8.5x EV/2027 FCF of $689M (unchanged), which compares to

our prior PT of $130, based on ~10x FY27e FCF; our new price target continues to

assume an approximately 1-turn discount to the peer group median. The biggest

risks to our Equal-weight rating would be a) faster than expected progress on AI

monetization and outperformance in core CCaaS supporting growth acceleration

(and here, would note that Cloud backlog growth has held above 20% for the past