Morgan Stanley says Nuix sell-off was “too severe”Morgan Stanley...

Morgan Stanley says Nuix sell-off was “too severe”

Morgan Stanley says the 32 per cent fall in Nuix’s share price on Friday was “too severe”, with the broker remaining positive on the ASX-newcomer’s outlook despite its first half result disappointing expectations.

The broker held steady with its overweight rating and $11.00 price target, even after the company’s shares fell to $6.06.

”At first look [the first half] results are a miss versus expectations and thus the risk profile surrounding full-year earnings delivery has increased,” said Morgan Stanley analyst Andrew McLeod.

“But, importantly, the company states the new business pipeline in the second half is strong and visibility provides confidence to reiterate all full-year FY21 numbers.”

Nuix blamed unexpected delays in contracts from December to January as a key reason behind the results miss while a strong Australian dollar also represented an unexpected headwind. Despite this, the company reiterated its guidance for full year revenue to be $194 million, annual contract value to be $200 million and EBITDA to be $64 million.

“We think the negative reaction is too severe,” said Mr McLeod.

“We remain confident in the opportunity from expansion into new verticals; a shift to software-as-a-service, and accretive mergers & acquisitions.”

Morgan Stanley is forecasting Nuix will enter the S&P/ASX 200 Index at the March quarterly rebalance. It said the stock only just missed out on inclusion in January when Pointsbet replaced Saracen Mineral Holdings following the gold miner’s merger with Northern Star Resources.