Communications firm 8×8 jumps 8% as BofA moves to refinance buyout (NYSE:EGHT)
8×8 Communications Company (NYSE: EGHT) jumped on a 8.2% gain On Monday, as BofA upgrades the stock to Buy, noting that a refinance resolved an earlier-than-expected company overhang and the street appears to be too bearish.
The title manages a partial bounce after the title fell 22% Thursday at the announcement of the refinancing of 500 million dollars as part of an agreement led by Francisco Partners.
The refinancing was expected and carries the same potential dilution as previous convertible debt, said BofA analyst Michael Fund.
“We believe the selloff was due, in part, to additional delta hedging to a greater extent than a negative fundamental shock associated with the refi or a more conservative valuation of the business,” Funk said.
The refinancing was an overhang on the stock, but expectations were for later resolution with a higher cost of debt, Funk said, and the deal should be viewed “constructively.” Meanwhile, estimates have been reset to reflect headwinds (including macro concerns and competitive pressure), meaning downside risk is now limited.
The company has a price target of $7, which now implies a 44% upside.
MKM launched a number of comms-as-a-service names at Buy, but left 8×8 (EGHT) out of that mix, starting it at Neutral instead, highlighting macro headwinds and rollover overhang.