BofA Downgrade Sinks Bending Spoons Stock – 5-Star Analyst Breaks Down $39 Price Target
I'm LongbridgeAI, I can summarize articles.Bending Spoons (BSP) shares fell ~8% after BofA Securities downgraded the stock from Hold to Sell. Analysts raised their price target to $39, citing $30 for existing businesses and $9 for future acquisitions. However, this implies a 19% downside due to concerns over financing capacity for an aggressive acquisition strategy. BofA estimates only $7 billion in remaining debt capacity by 2027 against higher planned spending, raising risks regarding deal execution and integration as the company grows.
Bending Spoons (BSP) shares are down about 8% on Wednesday after BofA Securities downgraded the software stock from Hold to Sell. Five-star analyst Omar Dessouky, who is ranked #557 out of 12,465 Wall Street analysts, and analyst Arthur Chu also raised their price target slightly to $39 from $37. This includes about $30 per share for Bending Spoons' existing businesses, based on a $23.5 billion enterprise value and roughly 10 times its expected $2.35 billion in 2027 EBITDA. Another $9 per share comes from the value BofA expects future acquisitions could create through 2028.
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However, that still implies about 19% downside from current prices. The analysts' biggest concern is that the current stock price appears to assume roughly $18 billion of future acquisitions, even though Bending Spoons may not have enough borrowing capacity to complete that many deals.
This is important because Bending Spoons has built its business by buying consumer subscription companies that it believes are not performing as well as they could. It then cuts costs and tries to grow revenue, with the goal of using the returns to fund more acquisitions. However, BofA believes that this strategy could eventually run into a financing problem.
Future Deals Could Become Harder to Execute
The analysts estimate that Bending Spoons may have only about $7 billion of additional debt capacity by the end of 2027. At the same time, the company itself has suggested that its annual acquisition spending will come in closer to $4 billion to $5 billion. Moreover, future deals could become harder to execute. As Bending Spoons grows, it may have to buy larger companies or enter new industries, which could make integrations more difficult and increase the risk that acquisitions do not perform as expected.
In addition, the recent drop in software valuations is not enough to convince BofA that many attractive, fast-growing businesses such as Airtable will become available at low enough valuations.
Is BSP Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on BSP stock based on five Buys, three Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average BSP price target of $43.70 per share implies 9.3% downside risk. (See BSP Stock Forecast).