National Bank Believing “patience is needed” for Copperleaf Technologies Inc. , National Bank Financial analyst John Shao lowered his recommendation for its shares to “sector perform” from “outperform” following the release of weaker-than-anticipated second-quarter results that displayed “multiple headwinds such as client capacity issues, macro uncertainties and a constrained demand environment.”
“According to the earnings call, it seemed those headwinds would likely continue throughout the rest of the year. In light of those considerations, we’re revising our financial forecasts and moving our stock rating to Sector Perform (was Outperform),” he said.
“Such a rating change was mainly based on our updated view that those macro headwinds will likely push the growth inflection point into next year. As such, its financial performance in future quarters will likely follow our revised growth trajectory with limited upside in the near term. To be clear, we still like Copperleaf for its strong product offerings in a niche market with virtually no competitors. That strong market leadership was further underscored by high customer stickiness with a net dollar retention rate of 111 per cent and a zero customer churn rate. Our view on those attributes remains the same, and we won’t hesitate to move back if future data points support an accelerated growth trajectory.”
Mr. Shao cut his target by $1 to $7. The average on the Street is $7.21.
“We continue to believe Copperleaf has a highly scalable and industry-leading platform. While the fundamentals remain strong for this name, those macro headwinds have us believe this name still needs some time before any catalyst could kick in to meaningfully move the stock,” he added.