Springer Nature stock up as J.P. Morgan initiates coverage with 'overweight' tag

Investing.com -- Shares of Springer Nature (F:SPGG ) jumped following J.P. Morgan’s initiation of coverage with an "overweight" rating and a price target of €29 in a note dated Monday (NASDAQ:MNDY ).

At 8:34 am (1:34 GMT), Springer Nature was trading 6.8% higher at €25.32.

Springer Nature is recognized as a leader in the global research publishing industry, with 74% of its revenue derived from this segment. Its brand is built on a strong portfolio of over 3,400 journals, including the prestigious nature series. 

As per analysts, the transition to Open Access publishing is central to the company’s growth strategy. 

Open Access, which allows free access to published research, has gained traction globally, with Springer Nature capitalizing on this shift to enhance visibility and attract new funding streams. 

“We forecast c11-12% journal growth in 2024 as Springer gains share from pure FOA players due to concerns around their research integrity,” said analysts at J.P. Morgan.

The note mentions that the company’s capacity to leverage transformative agreements, particularly in regions like Europe and the United States, to drive this transition. 

Hybrid journals, which accommodate both subscription-based and OA articles, are expected to play a pivotal role in boosting revenue streams. 

Springer’s expansion into Full Open Access journals further solidifies its competitive edge, enabling it to gain market share over competitors such as Hindawi and Frontiers.

The analysts also flag Springer Nature's potential in integrating artificial intelligence into its operations. Plans include launching a "Research GPT" product aimed at streamlining research processes, which could open new revenue streams by licensing its AI technologies.

On the financial front, Springer Nature is expected to maintain solid cash flow and margin improvements, with J.P. Morgan forecasting a medium-term annual EBIT growth of 5%. 

This is underpinned by its diversified revenue base, spanning regions such as EMEA, the Americas, and APAC. 

Despite risks related to the OA transition and potential competition, the company’s financial health and strategic initiatives position it for continued outperformance in the research publishing market.

Source: Investing.com