Needham Cuts Pluralsight Rating To Hold After Vista’s ‘Low’ Buyout Offer

Needham downgraded Pluralsight’s stock rating to Hold from Buy and withdrew its $25 price target, citing Vista Equity Partners’ “low” offer to buy the online education-software company.

The rating change comes after Pluralsight (PS) on Dec. 14 agreed to be acquired by Vista Equity Partners in an all-cash deal of $20.26 per share. As part of the transaction, private-equity firm Vista, in partnership with its institutional co-investors, will acquire all outstanding shares of Pluralsight, valuing the deal at $3.5 billion. Following the completion of the deal, Pluralsight will become a privately-held company.

Needham analyst Scott Berg said, “While we acknowledge the company has had operational challenges over the last 18 months between scaling its sales operations and the COVID backdrop freezing corporate learning budgets, we are big believers the PS platform is a very unique and highly strategic asset, leading us to view this acquisition price as low.”

Berg added, “We view the purchase valuation, at roughly 7.2x EV/sales on our FY21 estimate as good for Vista, less so for PS shareholders, and one not capturing the expectations of a recovering demand environment in FY21. Early management commentary suggests a thorough sale process, which implies a superior offer is unlikely.”

In addition to Needham, KeyBanc and Piper Sandler also downgraded the stock to Hold. Shares closed 6.4% higher on Monday, following the deal. (See PS stock analysis on TipRanks).

Like Berg, most of the Street is sidelined on the stock. The Hold analyst consensus is based on 9 Holds, 2 Buys and 1 Sell. The average price target stands at $20.05 and implies that the shares are more than fully priced at current levels. Shares have gained 17.3% year-to-date.

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