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(Sharecast News) - Analysts at Canaccord Genuity lowered marketing research firm System1 from 'buy' to 'speculative buy' on Tuesday and cut their target price on the stock from 865p to 550p, stating that macro headwinds appear to have paused growth.
System1 released an unscheduled trading update ahead of its interim results, guiding to more challenging trading conditions, with several larger customers spending "lower and slower" in the context of uncertain macro conditions. FX headwinds were also a drag on the top-line.
As such, Q2 trading was said to have followed Q1's subdued activity, with interim revenues guided to be 5% lower than the prior year, which Canaccord Genuity estimates to be 17.4m. FY26 revenue was now anticipated to be broadly flat year-on-year.
However, on a more positive note, Canaccord Genuity noted that System1 has continued to win new logos, including a number of competitive wins, with new business revenue expected to be similar to last year. Within this, Innovation was reported to have seen good demand, albeit from a smaller base.
"Nevertheless, given the persistent macro uncertainties and limited forward visibility, with H1 sales guidance implying a H2 weighting to both revenue and likely earnings (covering 47% of our updated FY26E sales estimate), we update our recommendation to a 'spec buy' (from 'buy')," said the Canadian bank. "We expect cash to hold strong throughout the forecast period as management keeps a tight control on costs, providing sufficient firepower to fund the dividend - as such, we model the dividend payout at the higher end of management's 30-40% payout range in both years."
On its revised estimates, Canaccord said System1 trades on a 2026 calendar year enterprise value-to-sales ratio of 1.0x and EV/EBIT ratio of 15x.
Reporting by Iain Gilbert at Sharecast.com
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