PowerSchool stock downgraded by Raymond James post $5.6B Bain Capital deal By Investing.com

On Tuesday, PowerSchool Holdings Inc. (NYSE:PWSC) experienced a shift in stock rating as Raymond James moved its stance from Outperform to Market Perform.

This change comes in the wake of last week’s announcement that PowerSchool will be acquired by Bain Capital for $5.6 billion, which translates to $22.80 per share. The deal represents a 37% premium over the share price prior to acquisition speculations.

The acquisition price is valued at 6.5 times the firm’s projected 2025 revenue and 27 times its forecasted 2025 free cash flow (FCF). The board members who act independently have recommended the transaction, and with majority shareholders giving their approval, the likelihood of a competing offer seems slim.

According to the firm, the acquisition is expected to be finalized in the second half of 2024. In light of these developments, Raymond James has noted that there appears to be minimal potential for additional gains for investors unless an unexpected higher bid is presented.

The analyst’s previous note on the subject further elaborates on the implications of the takeover. With the transaction endorsed by the board and supported by major shareholders, the market’s outlook on PowerSchool has been adjusted to reflect the anticipated completion of the deal and the current valuation cap implied by the agreed acquisition terms.

In other recent news, PowerSchool Holdings Inc. is set to be acquired by Bain Capital in a deal valued at $5.6 billion. The deal, anticipated to close in the second half of 2024, has led to multiple analyst firms adjusting their outlook on the company’s stock. Piper Sandler, Jefferies, RBC Capital, Needham, and Cantor Fitzgerald have all downgraded the stock, aligning their price targets with the acquisition price of $22.80 per share.

The acquisition, which is a significant development for the education technology company, will result in PowerSchool transitioning to a private entity. The agreed acquisition price represents a roughly 37% premium over the company’s share price from last month, before reports of the potential acquisition surfaced.

In terms of financial performance, PowerSchool’s Q1 revenue was reported at $185.0 million, slightly above consensus, and adjusted EBITDA exceeded expectations by 6.2%. The company has also been integrating AI capabilities into its product offerings, closing deals worth approximately $400,000 and building a pipeline nearing $10 million. These are recent developments providing investors with key points of interest.

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