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Switch Lower as Analysts Cite Concern About Customer Churn

Analysts weighed in on Switch's fourth-quarter performance with concerns about customer churn.
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Shares of Switch  (SWCH)  dropped Tuesday after the data-center company's fourth-quarter results raised analysts' questions about customer churn. 

The Las Vegas company reported fourth-quarter total revenue of $127.7 million, up from $120.5 million. The latest figure missed the FactSet analyst consensus estimate of $131.4 million. 

Earnings per share of 6 cents per share topped the consensus estimate by a penny. 

"With the industry's highest rated and most sustainable enterprise-class multitenant data centers, innovative edge colocation, secure storage solutions, and low-cost telecommunications offerings, ... Switch is uniquely positioned to benefit from the accelerating digital transformation among enterprises," Chief Executive Rob Roy said in a statement. 

Switch shares at last check were down 14% to $15.26. It has traded as low as $14.82, down 16%. A bit less than a year ago the stock touched a 52-week low of $10.30. 

Switch guided for 2021 revenue between $540 million and $555 million, with revenue growth weighted toward the back half of 2021. Analysts are expecting revenue of $550.8 million. 

Analysts at Raymond James downgraded the stock to outperform from strong buy while lowering their price target to $19 a share from $24. They cited limited disclosure related to customer churn as a risk. 

Jefferies analysts lowered their price target on Switch to $21 from $22 while affirming a buy rating. 

The investment firm noted that while revenue was weaker than expected, new leasing revenue reflects positive momentum for the company.

Cowen maintained its market-perform rating and $19 price target while also citing churn concern. Customer cloud migration "creates additional questions tied to the risk/visibility into further churn," the investment firm said.

While the stock looks cheap, "we remain comfortable on the sidelines," Cowen's note said, according to Bloomberg.