PowerSchool Holdings, Inc. (NYSE:PWSC) Downgraded by Macquarie

We recently compiled the list of the Analysts on Wall Street Lower Ratings for These 10 Stocks. In this article, we are going to take a look at where PowerSchool Holdings, Inc. (NYSE:PWSC) stands against the other stocks that received a downgrade from Wall Street analysts. But first, we are going to take a look at what the markets are doing.

Amidst the anticipation surrounding pivotal economic indicators, European futures are on the ascent, signaling a cautious optimism among traders as they prepare for the release of crucial US inflation figures and the Federal Reserve's forthcoming monetary-policy decision. While Asian equities faced a downturn, European stock futures, particularly contracts on the Euro Stoxx 50 Index, exhibited a marginal uptick of 0.2%. Concurrently, treasuries in Asia recorded marginal gains, while Bloomberg's dollar index extended its streak of consecutive advancements.

With Wednesday's release of the US Consumer Price Index (CPI) data and the Fed's policy announcement looming, analysts remain vigilant, mindful of the potential resurgence in market volatility. Despite the backdrop of market uncertainty, Japanese financial institutions continue to command attention from investors, buoyed by their steadfast growth trajectory over the past year. Portfolio manager Junichi Inoue of Janus Henderson Investors underscores the undervalued status of these firms, attributing their appeal to the upward trend in dividend payments. Inoue strategically augmented exposure to Japanese financial entities, which now represent approximately 18.05% of his portfolio. Noteworthy investments include Sumitomo Mitsui Financial Group Inc. and Tokio Marine Holdings Inc. The Janus Henderson Japan Opportunities Fund, under Inoue's stewardship, has notably surpassed the MSCI Japan Index, delivering a commendable 15% return this year.

Meanwhile, in Hong Kong, the property market slump persists, deepening with each passing day and marking a sustained downturn reminiscent of the SARS crisis two decades ago. Bloomberg Intelligence data reveals that real estate values, encompassing both residential and commercial sectors, have collectively plummeted by at least HK$2.1 trillion ($270 billion) since 2019. Projections from UBS Group AG and CBRE Group Inc. forewarn of further declines, underscoring the formidable challenges confronting Hong Kong's real estate sector amidst enduring uncertainty.

Market analysts are viewing Indian Prime Minister Narendra Modi's decision to retain Nirmala Sitharaman as the country's finance minister as a positive indicator of policy consistency, according to reports from Goldman Sachs and Barclays. The reappointment of Sitharaman, alongside the return of other familiar figures from Modi's previous administration, is interpreted as a signal of continuity in government policies. Sitharaman's reappointment comes at a crucial juncture, as she faces the task of navigating fiscal demands within a coalition government framework, following the Bharatiya Janata Party's inability to secure a majority in the elections. Goldman emphasizes the potential benefits of maintaining unchanged ministry positions, suggesting that this continuity could bolster efforts towards implementing reforms. Similarly, Barclays highlights the importance of maintaining focus on infrastructure development and fiscal consolidation, expecting these initiatives to remain central to the government's agenda under Sitharaman's leadership.

Oil prices dipped on Tuesday as cautious investors awaited key U.S. and China Consumer Price Index (CPI) data, alongside the Federal Reserve's policy meeting outcome. According to Reuters, brent crude futures slipped by 13 cents to $81.50 per barrel, while U.S. West Texas Intermediate crude futures edged down by 7 cents to $77.67 per barrel. Monday saw a brief uptick in prices, spurred by optimism surrounding increased fuel demand during the Northern Hemisphere summer vacation season, but analysts warned that this surge might be short-lived, particularly with the looming possibility of higher interest rates. Market strategist Yeap Jun Rong from IG noted that sustained recovery in oil prices may require more conviction, especially with the broader trend leaning towards downside movement since April. Traders remained on edge ahead of China's macroeconomic data release, particularly concerning inflation figures. OANDA senior market analyst Kelvin Wong highlighted the potential impact of China's Producer Price Index (PPI) data on oil prices, expressing concerns over a further slowdown in deflationary trends and its implications for oil demand. Additionally, ongoing Saudi crude exports to China and higher refinery margins provided some support to oil prices. Analysts also pointed to the possibility of the United States increasing crude purchases for its petroleum reserve, particularly if WTI stays below $79 per barrel. Energy Secretary Jennifer Granholm indicated plans to replenish the Strategic Petroleum Reserve, targeting purchases at around $79 per barrel, as maintenance on the stockpile is scheduled for completion by year-end.

In this article we listed 10 companies that were downgraded by analysts and ranked them by the change in their market prices. Negative changes signal that the market participants agree with the analysts’ assessment.

Charts

07. PowerSchool Holdings, Inc. (NYSE:PWSC)

Price Reaction after the Downgrade: -0.12(-0.53%)

On June 10, Macquarie made a significant adjustment to its evaluation of PowerSchool Holdings, Inc. (NYSE:PWSC), downgrading the company from an optimistic Outperform to a more neutral Neutral rating. This decision was prompted by a considerable surge in PowerSchool Holdings, Inc. (NYSE:PWSC) stock price, which Macquarie analysts believe now accurately reflects the company's near-term potential. Notably, PowerSchool Holdings, Inc. (NYSE:PWSC) shares have been trading in close proximity to the revised price target set by Macquarie, prompting the need for a reassessment of its rating.

Despite this downgrade, PowerSchool Holdings, Inc. (NYSE:PWSC) has demonstrated strong financial performance and has undergone significant recent developments. In the first quarter of 2024, the company reported revenues of $185 million, marking a notable 16% increase year-over-year. However, PowerSchool fell short of earnings expectations, reporting an EPS of $0.17 compared to a forecast of $0.22. Additionally, PowerSchool has been actively engaged in noteworthy corporate activities, including entering into an acquisition agreement with Bain Capital for $5.6 billion, slated to close in the second half of 2024. This impending acquisition is expected to significantly impact the company's strategic direction and market performance in the foreseeable future.

Macquarie's downgrade underscores a balanced perspective on PowerSchool Holdings, Inc. (NYSE:PWSC) stock, indicating that while the company's fundamental aspects remain robust, the current stock price may limit potential short-term gains for investors. This cautious stance acknowledges PowerSchool Holdings, Inc. (NYSE:PWSC) positive trajectory but suggests a reevaluation of expectations given the recent market dynamics and the pending acquisition. Following the downgrade by Macquarie, the market response was relatively modest, with PowerSchool Holdings, Inc. (NYSE:PWSC) stock price experiencing a slight decrease of 0.53%. Nevertheless, the stock closed at $22.35 on June 10, reflecting ongoing investor uncertainty regarding the company's immediate outlook in light of the revised rating.

Aristotle Capital Small Cap Equity Strategy stated the following regarding PowerSchool Holdings, Inc. (NYSE:PWSC) in its first quarter 2024 investor letter:

“PowerSchool Holdings, Inc. (NYSE:PWSC), a leading provider of cloud-based software for K-12 education in North America, was added to the portfolio. Overall, we believe the company stands to benefit from the growing demand for digital education solutions, an increased need for efficiency in school operations, and a favorable funding environment. Moreover, we believe the company’s ability to innovate and adapt to the evolving needs of the education sector while expanding its capabilities and solutions should result in up-sell opportunities that can further create value for their customers and shareholders.”

Overall, PWSC ranks 7th among the stocks recently downgraded by Wall Street analysts. You can visit Analysts on Wall Street Lower Ratings for These 10 Stocks to see the other stocks that reacted to analyst downgrades. While we acknowledge the potential of PWSC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PWSC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.