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On Tuesday, BMO Capital Markets adjusted its stance on Repay Holdings Corporation (NASDAQ:RPAY), a payment technology provider, by reducing the price target on the company’s shares to $8.00 from the previous $10.00. Despite this change, the firm maintained a Market Perform rating on the stock. The stock currently trades at $7.12, near its 52-week low of $7.08, with InvestingPro analysis indicating potential undervaluation based on its comprehensive Fair Value model.
The revision follows Repay’s fourth-quarter financial results, which revealed a 9% year-over-year decline in organic gross profit growth, excluding political contributions. This marked a deceleration from the third quarter of 2024, where the company experienced a 1% year-over-year increase. While overall revenue grew 5.53% in the last twelve months, with a healthy gross profit margin of 77.12%, the company reported a loss of $0.11 per share. According to BMO Capital analysts, the weaker-than-expected performance was due in part to additional client losses and increased challenges in the business payments sector.
BMO Capital anticipates that some of these difficulties will continue into 2025 but projects a gradual recovery in the second half of the year, aiming for mid-single-digit percentage organic growth. Accompanying the release of their fourth-quarter 2024 results, Repay announced the initiation of a strategic review to maximize shareholder value. The company also decided against providing financial guidance for the year 2025.
In light of these developments, BMO Capital has revised its forward adjusted EBITDA estimates for Repay downwards by 7-9%. The new price target of $8.00 reflects these updated projections and the challenges faced by the company in the near term. The strategic review process launched by Repay is an effort to explore various options that could enhance value for its shareholders, indicating a proactive approach to the company’s current financial position and market performance.
In other recent news, Repay Holdings Corporation reported its fourth-quarter 2024 earnings, which revealed an earnings per share (EPS) of $0.24, slightly below the projected $0.25. Revenue for the quarter was $78.3 million, falling short of the expected $82.41 million, marking a 5% miss. Despite these shortfalls, the company demonstrated a 3% year-over-year increase in revenue and a 9% growth in adjusted EBITDA, reflecting effective cost management. Analysts from Citi, including Andrew Schmidt, have maintained a Neutral rating on Repay Holdings, while adjusting the stock price target from $10.00 to $8.00 following the earnings report. This decision was influenced by the company’s underperformance in both its Business-to-Business and Consumer segments, partly due to client losses and macroeconomic challenges. Furthermore, Repay Holdings is conducting a strategic review to explore various options, including potential mergers and acquisitions. The company has not provided specific financial guidance for 2025, citing the need to address ongoing strategic and operational challenges. These developments have led to mixed investor sentiment, reflecting both caution and optimism regarding the company’s future direction.
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