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SSNC – Although management has concerns about their outlook and other near-term headwinds, market expectations are far too bearish and equity upside is likely

November 25, 2020

  • SS&C Technologies Holdings, Inc. (SSNC:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 16.2x Uniform P/E, implying bearish expectations for the firm. Although management’s concerns about their outlook, acquisition opportunities, and Intralinks suggest the potential for near-term headwinds, market expectations are overly bearish, suggesting long-term equity upside is likely
  • Specifically, management may lack confidence in their ability to secure partnership and acquisition opportunities, allocate enough capital for quality acquisitions, and improve their DST business. Management may also have concerns about the sustainability of mandates for their fund administration business and their ability to increase proceeds from option exercises. Moreover, they may lack confidence in their ability to sustain adjusted operating income and control interest expense. Finally, management may be exaggerating the potential of Intralinks, and they may be concerned about their ability to meet adjusted revenue guidance
  • Although management’s concerns about their outlook, acquisition opportunities, and Intralinks suggest the potential for near-term headwinds, given the firm’s dominant market position, market expectations are overly bearish. As such, long-term outperformance is likely warranted