Investors should stay on the sidelines for now when it comes to payments company NCR , according to Morgan Stanley. Analyst Erik Woodring downgraded NCR to equal weight from overweight, saying the path to unlocking shareholder value is “less clear and longer tailed” after the company said it would split its business in two parts: CommerceCo, for digital banking, retail, and hospitality, and ATMCo for self-service banking and ATM networks. “While we commend NCR’s management team and board for following through on their commitment to take action following a strategic review, we don’t believe the path to unlocking shareholder value – and thus stock outperformance – is as clear following last Thursday’s announcement that NCR will separate into 2 separate entities,” Woodring wrote in a Monday note. “Our analysis of past spin-offs shows little-to-no outperformance is realized during the period from spin announcement to the separation date, and in many cases, spin-offs have failed to create value long-term post-spin,” Woodring wrote. The decision only magnifies existing shareholder concerns, according the analyst. NCR will have to outline key details around capital structure and leadership teams, while also contending with a difficult macro environment, when it was already a “turnaround story” for the past several years, the note read. The stock is down 42% this year. “Ultimately, the question we are left asking ourselves is – will the market put aside these risks, view this transaction as value-enhancing, and re-rate shares over the next 12 months? We are less convinced on this front,” the analyst wrote. The analyst cut his price target to $27 from $38. The new price target represents about 16.4% upside from Friday’s closing price of $23.20 per share. The stock fell 2.6% in Monday premarket trading. —CNBC’s Michael Bloom contributed to this report.
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