Analyst Note| Zain Akbari, CFA |
We plan to reduce our $56 per share valuation of wide-moat Wiley by a mid- to high-single-digit percentage after it posted first-quarter (ended July 31) earnings that suggest more pressure on student enrollments than we expected. While the period is seasonally small and performance should improve through the rest of the year, we expect a low-single-digit percentage reduction in our $3.84 full-year adjusted EPS target. Still, our long-term forecast is intact (mid-single-digit percentage top-line growth, roughly 20% adjusted EBITDA margins) as Wiley should be able to capitalize on long-term demand for research and education services from corporate and academic clients. We believe Wiley’s advantaged place in the learning economy justifies a higher valuation than the current trading price and see the low-double-digit percentage decline in trading after the news as disproportionate. We see a buying opportunity for patient investors willing to endure near-term turbulence.