BofA Stays On The Sidelines Of Thomson Reuters

Thomson Reuters Corp TRI has sold 55% of its stake in Refinitiv to Blackstone Group BX.

While the sale makes Thomson Reuters a “cleaner, faster growth story that should be a solid defensive compounder over time,” the news already seems priced in and leaving little room for upside, according to Bank of America Merrill Lynch.

The Analyst

Bank of America’s Gary Bisbee reinstated coverage of Thomson Reuters with a Neutral rating and a price target of $70.

The Thesis

The Refinitiv transaction has boosted Thomson Reuters’ growth outlook and leadership positions in key markets, Bisbee said in the note.

Thomson Reuters has recently increased investments and management focus on the remaining businesses, which has resulted in moderate revenue acceleration, Bisbee mentioned. He expects the company to generate double-digit compound growth in earnings and cash flow in the next few years.

The analyst added that Refinitiv could achieve profit growth and deleveraging under Blackstone, driving appreciation in the value of Thomson Reuters’ remaining 45% stake.

Bisbee cited the risks of owning Thomson Reuters as the relatively full valuation of its stock, pressure on the Global Print and Reuters News businesses, heightened execution risks and high expectations.