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On Wednesday, Canaccord Genuity updated their analysis on Repay Holdings Corporation (NASDAQ:RPAY), revising the company’s price target to $12.00 from the previous $13.00, while continuing to endorse the stock with a Buy rating. Currently trading at $6.11, the stock sits near its 52-week low of $6.00, with analyst targets ranging from $7.50 to $12.00. The firm’s analyst, Joseph Vafi, provided insights into the current standing and prospects of the mid-cap fintech payments company, noting both strengths and challenges it faces. InvestingPro data shows the stock’s RSI suggests oversold territory.
Vafi highlighted Repay’s robust margin structure and free cash flow (FCF) conversion, pointing out that these financial metrics nearly satisfy the Rule of 40. The company maintains an impressive 77% gross profit margin and generated $149 million in levered free cash flow over the last twelve months. Despite this strong financial health, Repay is experiencing some top-line growth issues, with revenue growing at 5.5%, attributed to a decrease in political media advertising spending following the presidential election cycle and the loss of some customers due to mergers and acquisitions.
The analyst remains optimistic about Repay’s potential, citing the company’s current low valuation and its strategic review process as reasons for a favorable risk/reward profile for investors. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value assessment, trading at just 0.76 times book value. While there are headwinds, the company’s initiatives, such as investing in enterprise salesforce and focusing on growing segments like business-to-business accounts payable automation, position it well for future growth. For deeper insights into Repay’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
Repay is also facing sluggishness in some consumer segments, reflected in its recent stock performance, with a 27.8% decline over the past six months. Vafi noted that auto loan and personal loan payment volumes are currently slow, which can be attributed to higher charge-offs in loan portfolios originated in 2022 and a more conservative approach to new lending by financial institutions. This trend is affecting the payment volumes processed by Repay, though InvestingPro indicates net income is expected to grow this year.
The analyst’s review reflects a nuanced view of Repay’s current market position, acknowledging the company’s solid financial foundation while also recognizing the external factors that are impacting its growth trajectory. With an InvestingPro Financial Health Score of 2.45 (rated as ’FAIR’), and a current ratio of 2.69 indicating strong liquidity, the company maintains a stable foundation. With the revised price target and maintained Buy rating, Canaccord Genuity signals continued confidence in Repay’s long-term potential despite short-term challenges. Discover 12 additional exclusive ProTips and comprehensive financial metrics for Repay on InvestingPro.
In other recent news, Repay Holdings Corporation announced its executive bonus plan for 2025, setting targets based on financial and individual performance, with a focus on Adjusted EBITDA and Gross Profit for business units. The company’s fourth-quarter financial results showed revenue below expectations, attributed to the loss of three clients, impacting revenue by approximately 7%. Despite this, Repay’s adjusted EBITDA exceeded DA Davidson’s forecast by 1%. Following these results, DA Davidson reduced the price target for Repay from $14.00 to $12.00 but maintained a Buy rating, reflecting optimism in the company’s potential. Similarly, Benchmark also lowered its price target to $12.00 while maintaining a Buy rating, citing the company’s strategic review as a positive step towards enhancing shareholder value.
BMO Capital Markets adjusted its price target for Repay to $8.00 from $10.00, maintaining a Market Perform rating, and noted a 9% year-over-year decline in organic gross profit growth. The firm anticipates challenges continuing into 2025 but expects a gradual recovery later in the year. Citi also reduced its price target to $8.00 from $10.00, maintaining a Neutral rating due to underperformance in the B2B and Consumer segments and the decision not to provide 2025 guidance. Repay has initiated a strategic review to explore options for maximizing shareholder value, which may include restructuring or other changes. These developments indicate a period of transition for Repay Holdings as it addresses recent challenges and seeks opportunities for growth.
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