Wall Street analysts are concerned over the negative business ramifications from Equifax’s data breach announcement Thursday.
Analysts are worried Equifax’s data breach crisis may cost the company hundreds of millions of dollars and hurt the company’s reputation for years to come. Equifax, which supplies credit information and other information services, revealed on Thursday it suffered a data breach that could have potentially affected 143 million consumers. The company said 209,000 credit card numbers were obtained, in addition to „certain dispute documents with personal identifying information for approximately 182,000 U. S. consumers.“ Shares Equifax plummeted by 13 percent on Friday in the wake of the announcement. Stifel compared the incident to previous cybersecurity breaches at prominent retailers. The „significant data breach is likely to cost the company materially, and costs could drag on for a number of years, “ analyst Shlomo Rosenbaum wrote in a note to clients Friday. „We aren’t changing estimates right now because of lack of clarity, though clearly ours and consensus estimates are too high in the near term.“ In similar fashion, SunTrust also focused on the negative impact to the company’s credibility with consumers. „This is clearly a material event, in our opinion. The breach compromises Equifax’s reputation as a trusted steward of consumer data, and will create a near-term business disruption, per the company’s public comments, “ analyst Andrew Jeffrey wrote in a note to clients Thursday. Equifax shares have outperformed the market this year before the news. Its stock rallied 21 percent year to date through Thursday versus the S&P 500’s 10 percent return. To assess the potential costs for Equifax, Stifel’s Rosenbaum cited the large credit card breaches at Target in 2013 and Home Depot in 2014, when hackers got access information on tens of millions of customers. „Based on large scale breaches at Target and Home Depot, we believe $300M-$325M in gross costs for the breach would not be unreasonable, “ he wrote. Cowen analyst George Mihalos added „based on prior cyber security incidents, we would be unsurprised to see a total cost exceeding $200 million“ in a report Thursday. To be sure, while Wall Street agreed the data breach was a significant negative development for Equifax they aren’t giving up totally on the company yet. Both SunTrust and Cowen reiterated their buy and outperform ratings respectively. In addition, Stifel also maintained its buy rating, but removed Equifax from the firm’s recommended „select list.“ The firms also defended the company over the controversy surrounding insider selling after the breach. Three Equifax executives sold shares worth nearly $2 million in the company days after a data intrusion was discovered, according to filings to the SEC. „Management selling a few days after the discovery looks bad, though extent of breach likely not known at that time, “ Stifel’s Rosenbaum wrote. Equifax acknowledged later in a statement that the three executives sold a „small percentage“ of their shares, but that they „had no knowledge that an intrusion had occurred at the time they sold their shares.“ The company did not immediately respond to a request for comment on the Wall Street research coverage. -CNBC’s Todd Haselton and Michael Bloom contributed to this report.
