Moody's (MCO) is facing potential upside from capital market recovery over the medium term despite the current weak issuance, forecasts of issuance staying muted in March, and persistent market volatility, RBC Capital Markets said in a note Monday.

The firm, citing analysis from its data science team RBC Elements, lowered its revenue projections for Moody's Investors Service, or MIS, and now projects MIS's Q1 transaction revenue to fall to $647 million. Overall Q1 MIS revenue is now estimated at $972 million, a 1.6% year-over-year decrease, down from a previous estimate of $1.04 billion, the note said.

The reduced forecast comes as market uncertainty, driven by macroeconomic and political factors, has dampened debt issuance. RBC also lowered its full-year 2025 MIS revenue growth projection to about 5%.

"Despite the potential year-over-year decline in credit issuance near-term due to the difficult comparables, secular trends, namely disintermediation of credit and increased debt penetration, should drive issuance faster than global GDP growth on a normalized basis," RBC analysts said in the note.

The firm said secular trends and pricing increases support a high-single-digit annual growth rate for MIS revenue over the medium term.

RBC has an outperform rating on Moody's with a price target of $550.

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