Canaccord Genuity downgrades System1 to ‘hold’

by | Feb 9, 2022

Analysts at Canaccord Genuity lowered their rating on market research company System1 from ‘buy’ to ‘hold’ on Wednesday and cut their target price on the stock from 430.0p to 405.0p.
Canaccord said System1’s third-quarter trading update showed that data-driven revenues had continued to build during the period, with automated data products generating £2.8m in revenues to represent 43% of the quarterly total – up from the 36% reported with its interims in November.

However, while Canaccord acknowledged that data sales had continued to see “a fast take-up”, attrition in legacy consultancy revenues remained strong as customers switched to the data-driven model.

As a result, the Canadian bank reduced its full-year revenue estimates by 6% to £25.5m, while maintaining its expectation that data will contribute 44% of the annual total.

“We are maintaining our FY21E PBT estimate of £1.8m which reflects a Q3 profit performance that was in line with management expectations against a ramp of investment in people and product, as previously guided. This largely anticipates a lower expectation of bonus expense, and therefore opex, on reduced consultancy sales,” said Canaccord.

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