3P Learning has reduced revenue guidance, with the reduction broadly split across Australasia and the Americas, with Europe & the Middle East resilient.
Margins have been affected by top line weakness as well as an increase in the cost base as the company invested for growth.
Macquarie believes the margin potential and longer-term licence growth is well above FY16 levels but requires more clarity on the level of investment in the US.
While the uncertainty created by the announcement will impact the rating in the near term the broker will reassess the stock after strategic initiatives are outlined in coming months. Outperform retained. Target falls to $1.50 from $2.06.
Sector: Consumer Services.
Target price is $1.50.Current Price is $0.71. Difference: $0.79 – (brackets indicate current price is over target). If 3PL meets the Macquarie target it will return approximately 53% (excluding dividends, fees and charges – negative figures indicate an expected loss).