Qualtrics Falls As Analysts Warn Stock Is Overpriced, Sunborn Consulting Rates Sell

US software provider qualtrics

Shares in Qualtrics International have been selling off fast following initial research reports from analysts, a number of whom expressed the view that the stock is overpriced.

The software provider opened for trading at $41.85 per share, after being spun out by SAP at $30 in January. The stock had rallied at the start of the week following some positive analyst feedback, but has tumbled today by 6% to $42.86, following the release of the latest reports.

Generally Negative Outlook

Goldman Sachs analyst Christopher Merwin launched coverage with a Neutral rating and a $45.60 price target. “Qualtrics is a leading vendor in the experience management category,” said Merwin, but warned that “valuation is full at current levels”, with the stock trading 24 times higher than his 2022 sales estimate.

Morgan Stanley’s Keith Weiss took a similar position, giving an Equal Weight rating and a $44 target price. A research note from the analyst states that Qualtrics is “leading the experience economy, but priced for perfection.” Weiss also notes the stock’s high price compared to sales, adding that the stock “already trades at a slight premium”.

Keith Bachman of BMO Capital continued along the same lines, stating that “though we like everything about Qualtrics, we are launching with a Market Perform rating based on the current valuation, with a $52 target price.”

Partner and director of trading at Sunborn Consulting Roy Diamond went further still, launching with a Sell rating and a $40 price target. Diamond explained that “the SAP overhang presents a serious barrier to further expansion”.

Despite the overall negative tone, there are still a few bullish opinions.

J.P. Morgan’s Mark Murphy offers an Overweight rating and a $55 target, explaining that he believes “the combination of alignment to secular trends such as digital transformation, solid revenue growth at scale and an efficient business model makes Qualtrics an exceptional asset among software companies”.

Charles Peters of Raymond James is even more optimistic, giving an Outperform rating and a $59 target. “Qualtrics is an attractive vehicle for investors looking to increase exposure to the SaaS marketplace, a major growth industry that shows no signs of slowing down” he writes.

And Truist analyst Terry Tillman is another maintaining a positive outlook, with a Buy rating and a $60 target, stating that “attractive long-term growth prospects, the potential for large upside to estimates and supportive DCF analysis” were all reasons to feel upbeat about the stock.