8X8’s Financial Outlook Hindered by Fuze Transition and Growth Challenges

Morgan Stanley analyst Meta Marshall maintained a Sell rating on 8X8 (EGHT – Research Report) today and set a price target of $1.90.

Meta Marshall has given his Sell rating due to a combination of factors impacting 8X8’s financial outlook. One of the primary concerns is the ongoing transition involving Fuze, which continues to act as a significant obstacle to achieving top-line growth. Although there are signs of acceleration in the core business excluding Fuze, it is anticipated that it will take several years for the entire business to reach high single-digit growth rates, prompting a cautious stance.
Additionally, while there are positive undercurrents such as improved capital structure and stabilization, the company still faces challenges with operating margins as it invests in growth. The transition with Fuze is expected to keep top-line growth relatively flat, and the EBITDA estimates have been revised downward. Despite the investment in growth being a strategic move, the lack of immediate payoff and the need for clearer growth signals contribute to the Sell rating, as investors remain hesitant to engage until more substantial improvements are evident.

Based on the recent corporate insider activity of 60 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of EGHT in relation to earlier this year.