Although ServiceMaster Global Holdings Inc (NYSE: SERV) is among the least exposed stocks to COVID-19, it has significantly underperformed the S&P 500 since the recent market peak on Feb. 19, according to Morgan Stanley.

The ServiceMaster Analyst

Toni Kaplan upgraded ServiceMaster Global Holdings from Equal-Weight to Overweight and reduced the price target from $43 to $35.

The ServiceMaster Thesis

The market seems to be overly focused on the reduction in brand value and too concerned about ServiceMaster Global’s balance sheet, Kaplan said in a Thursday upgrade note. (See the analyst's track record here.)

While several business services stocks have exposure to the COVID-19 slowdown and may suffer significant declines in revenue, ServiceMaster Global is “somewhat hedged to the ongoing pandemic,” the analyst said.

Eighty percent of the company’s revenue is recurring, and there is demand from residential customers for pest control services, he said.

While commercial customers are more impacted by business closures, they will also need to keep facilities serviced for when workers return, Kaplan said.

“We now forecast a 5% organic revenue decline in 2020, which is relatively muted vs other companies given the depth of the ongoing pandemic.”

SERV Price Action

Shares of ServiceMaster Global Holdings were up 0.71% at $25.58 at the time of publication Thursday.

Related Links:

RBC Upgrades ServiceMaster Global On Improving Customer Retention, Nomor Acquisition

Nomura Maintains Buy on ServiceMaster Global, Raises Price Target to

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