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Equifax breach hurt consumers – but they‘re not the company‘s main clients

 (FinancialPress) — The massive data breach that Equifax (EFX) failed to prevent affected hundreds of millions of US citizens, exposing critical personal and financial data. The fact that the company took weeks to make the leak public only added insult to injury.
Consumers, logically, expect the fallout to affect the company’s financials deeply – a result that should be reflected in their third-quarter earnings report due Wednesday.
The thing is, consumers are not Equifax‘s main clients. Businesses are. And Wall Street knows this.

“Megabreaches creates opportunity,” says Wells Fargo Securities analyst William Warmington, Jr.’s.

Even though the estimates set by Wall Street for the company may prove to be too high in the wake of everything that transpired, stock volatility could come from that – which is seen by SunTrust Robinson Humphrey analyst Andrew Jeffrey as a window of opportunity.

He explained: “Our view remains that Equifax’s core value proposition — facilitating underwriting, decisioning, marketing and risk management — remains intact.“

Wells Fargo‘s Warmington chimed in, stating that while breach-related fines and out-of-court settlements could add up to anywhere from $500 million to $1 billion – without counting legal, cybersecurity and customer service costs that will unequivocally entail. Equifax, however, has deep enough pockets to absorb the damage and turn it into not much more than an anecdote and a harsh learning experience.

Regulators could also ask for increased cybersecurity to be implemented, or system audits. While Warmington recognizes this “could reduce EFX‘s profitability… based on previous breaches, we do not expect such expenses would be material to EFX’s financials.”

Not everyone is as enthusiastic about the fallout as the former analysts. RBC Capital Markets analyst Gary Bisbee downgraded Equifax on Monday. He feels that the severe uncertainties about how the breach will affect results is enough to warn against buying company stock.

“We believe that it could take several quarters for these questions to come into focus, and we do not expect Q3 results to provide many answers,” Gary Bisbee, RBC Capital Markets.  

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