Barclays cuts AvidXChange stock rating to Equal Weight, PT to $8

On Tuesday, Barclays (LON:BARC) analysts adjusted their stance on AvidXChange Holdings (NASDAQ:AVDX), downgrading the company’s stock from Overweight to Equal Weight and revising the price target downward to $8 from the previous $13. The revision follows AvidXChange’s fourth-quarter performance, which, despite surpassing expectations, presented a fiscal year 2025 guidance that did not meet Wall Street’s forecasts. According to InvestingPro data, the stock has fallen nearly 19% in the past week, with the current price suggesting the stock is slightly undervalued based on Fair Value analysis.

The company anticipates that the same macroeconomic challenges that have impacted the business in recent quarters will persist, potentially dampening revenue growth. These headwinds include weaker transaction growth expectations and pressure from interest and political revenue growth. While InvestingPro data shows the company achieved 15.3% revenue growth in the last twelve months, Barclays has decided to take a more cautious approach, opting to observe the company’s growth trajectory and the resolution of macroeconomic pressures before reassessing its position. InvestingPro Tips indicate the stock is in oversold territory, though 11 analysts have recently revised their earnings expectations downward. Subscribers can access 8 additional ProTips and comprehensive analysis in the Pro Research Report.

Barclays’ reduced price target is based on a 6 times multiple of the firm’s estimated FY26 gross profit of approximately $379 million, a decrease from the previous 8 times multiple of an estimated $426 million. The downgrade also factors in a discounted cash flow analysis. Current valuation metrics from InvestingPro show the stock trading at a P/E ratio of 192.3x and an EV/EBITDA of 35.4x, while maintaining a healthy gross profit margin of 72.3%. The analysts have expressed concern over near-term demand headwinds, which they believe could lead to AvidXChange’s underperformance in comparison to other companies within their coverage.

The longer-term concerns contributing to the downgrade include uncertainties about AvidXChange’s normalized growth profile, particularly whether the current challenges are temporary, resulting from the macro environment, or indicative of more persistent issues like increased competition, a smaller total addressable market, or reduced demand.

In summary, Barclays has shifted to a neutral position on AvidXChange shares, reflecting a more conservative outlook until there is greater clarity on the company’s ability to navigate and grow amidst ongoing macroeconomic challenges.

In other recent news, AvidXChange Holdings reported its fourth-quarter 2024 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.08, compared to a forecast of $0.07. Revenue for the quarter reached $115.4 million, slightly above the anticipated $114.84 million, marking a 10.9% year-over-year growth. Despite the positive earnings report, analysts from Piper Sandler, Keefe Bruyette & Woods, KeyBanc Capital Markets, and BTIG have expressed concerns over the company’s 2025 outlook, leading to several adjustments in price targets and stock ratings.

Piper Sandler and Keefe Bruyette both reduced their price targets to $8, citing a challenging macroeconomic environment and AvidXChange’s conservative fiscal year 2025 guidance. KeyBanc Capital Markets downgraded the stock from Overweight to Sector Weight due to the disappointing FY25 outlook, despite the company’s Q4 2024 revenue slightly surpassing expectations. BTIG also lowered its price target to $11 while maintaining a Buy rating, pointing to lower-than-expected revenue guidance for 2025.

AvidXChange’s management has expressed optimism about new partnerships and the potential for increased revenue through new product launches, such as Payment Accelerator 2.0 and Spend Management platforms. Analysts have noted that while the company is facing macroeconomic headwinds, its strategic initiatives and partnerships, including those with Appfolio (NASDAQ:APPF) and M3, could drive future growth. However, the timeline for these developments remains uncertain, and analysts have taken a cautious stance on the stock until more clarity emerges on market conditions and retention rates.

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