Brightview Holdings' Margin Strategy Hints At Strong Revenue Headwinds Ahead, Says Bearish Analyst

Brightview Holdings Inc BV shares were down on Thursday, after adding more than 22% over the past month.

Although the company’s efforts to weed out unprofitable and low-margin contracts will help margin recovery, its EBITDA margins could remain below the pre-COVID pandemic levels over the next three years, according to Goldman Sachs.

The Brightview Holdings Analyst: George Tong downgraded the rating for Brightview Holdings from Neutral to Sell, while raising the price target from $8 to $10.

The Brightview Holdings Thesis: The company’s strategy to exit uneconomical contracts will adversely impact revenues in the near-to-medium term in its landscape maintenance business, which currently contributes around two-thirds of total revenue, Tong said in the downgrade note.

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“The company’s decision to manage down its subcontractor business, which operates at lower margins, also creates headwinds to landscape maintenance revenue trends, in our view,” the analyst wrote.

“Further, we believe a warm 2023-2024 winter season, which represented the warmest winter on record in the US and the third warmest February in 130 years, will cause a shortfall in BV’s snow removal revenue in F2Q relative to consensus and management’s guidance,” he added.

BV Price Action: Shares of Brightview Holdings had declined by 1.89% to $11.95 at the time of publication on Thursday.

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