Where Is The Floor In Equifax Shares?

The worst-case scenario for Equifax Inc. EFX is difficult to quantify, but analysts at Morgan Stanley felt it prudent to revisit their model and include several assumptions amid the company's data breach.

Toni Kaplan maintains an Equal-weight rating on Equifax's stock with a price target lowered from $140 to $127.

There are at least four concerns that could impact Equifax's stock moving forward:

• The data breach will have a greater impairment to its Global Consumer Solutions (GCS) segment.
• The data breach could "bleed" into other business lines.
• The entire sector could come under increased scrutiny and regulation.
• Fines from regulatory bodies could come in higher than expected.

Under a worst-case scenario, consumers will question the logic behind paying money to Equifax to monitor their credit when they couldn't even detect their own data breach after it occurred, the analyst said. The impact to this could result in the direct-to-consumer business (60 percent of GCS) being "completely impaired." In fact, changes in the regulatory environment could force Equifax to provide credit monitoring for longer than one year which would cause the DTC business to "fall to zero."

Meanwhile, business customers could also decide not to continue doing business with Equifax although the company maintains a position that databases in other segments are not compromised, Kaplan noted.

Bottom line, the impact to the data breach continues to evolve as new information is being disclosed. While the risk to the stock is "significant" in the immediate term, the situation will take time to resolve.

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