Microsoft’s (MSFT) decision to end its original equipment manufacturing partnership with Qualys (QLYS) on May 1 poses potential “material” topline risks for the cloud protection and cybersecurity company, Morgan Stanley said in a research note.
The Morgan Stanley analysts estimated that Microsoft likely accounts for 5% to 10% of Qualys’ yearly revenue, which totaled $489.7 million in 2022, the last year for which full results are available. “We see topline pressures increasingly probable going forward,” the analysts said, adding Qualys’ share price does not adequately reflect those risks.
Morgan Stanley reiterated its underweight stock rating and $150 price target for Qualys, saying the company will need to boost sales and marketing spending during 2024, which will weigh on its earnings before interest, taxes, depreciation and amortization margin this year. The share price also could see a more than 20% decline from current levels, they said.
Qualys shares were down by nearly 10% in recent trading.