Canaccord Genuity lowers target price on RWS

Canaccord Genuity said RWS' recent interim trading update had "negatively surprised to the downside", with a roughly 7% organic sales decline flagged, a significant acceleration from the 3% drop in the prior half.

The Canadian bank noted that RWS had cited a number of reasons for this, including rising pricing pressure and lower volumes among its big tech customers in language services, as well as the impact of customer losses and approval delays in regulated industries, "muted growth" in software/technology, and "continued depressed spending" in IP services.

Canaccord noted that RWS did not formally reiterate its 4% organic growth guidance for this year, but given the weak first-half performance, it now views it as being "out of reach".

"On our lowered estimates FY23 EPS is expected to decline by 12% yoy, staying broadly flat thereafter implying 6-19% downside to consensus EPS expectations. We set our new target price at 265p, based on a c.11x cal. 2024E P/E multiple, broadly in line with UK tech-enabled services peers," said Canaccord, which maintained its 'hold' rating on the stock.

Reporting by Iain Gilbert at Sharecast.com