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On Wednesday, CFRA analyst Firdaus Ibrahim revised the rating for Temenos AG (TEMN:SW) (OTC: TMSNY), shifting from a "Sell" to a "Hold" stance, while also increasing the price target from CHF56.00 to CHF80.00. The adjustment reflects a positive reassessment of the company’s financial outlook and market position. According to InvestingPro data, the stock has shown remarkable momentum, delivering a 31.65% return over the past six months and currently trading near its 52-week high of $90.90.
Temenos, known for its core banking software solutions, reported a 5% year-over-year revenue increase in 2024 when measured at constant currency. This growth has been attributed to the continued demand for its products. The company’s annual recurring revenue (ARR) also experienced a robust 12% growth, meeting the upper end of its guidance. This performance is seen as an endorsement of Temenos’s software-as-a-service (SaaS) and subscription-based business model. InvestingPro analysis reveals strong fundamentals with a 60.39% gross profit margin and an impressive financial health score, though it currently trades at a relatively high P/E ratio of 42.22x.
The company has set ambitious targets for 2025, aiming for at least 12% ARR growth, 5%-7% subscription/SaaS growth, and a minimum of 5% EBIT growth. These goals indicate confidence in the company’s ongoing momentum. Despite the challenges posed by a competitive landscape and the risks associated with transitioning more customers to SaaS, Temenos’s focus on cloud-based banking software and cost efficiency measures are expected to support a stable outlook. For deeper insights into Temenos’s growth potential and 14 additional ProTips, visit InvestingPro.
CFRA’s price target of CHF80.00 is based on a 2025 price-to-earnings (P/E) ratio of 22.1 times, aligning with the company’s three-year average forward P/E. The firm maintains its 2025 earnings per share (EPS) forecast at $4.00 and has established a 2026 EPS forecast of $4.10.
The upgrade to a "Hold" rating comes in light of Temenos’s resilient performance and positive developments, despite broader macroeconomic uncertainties and a general slowdown in IT spending. CFRA’s revised position suggests a neutral perspective on the company’s prospects going forward.
In other recent news, Temenos AG has announced its preliminary fourth-quarter results, which showed a 2% sales beat and a 19% adjusted EBIT beat, leading Citi to raise its price target from CHF65.00 to CHF71.00 while maintaining a Neutral rating. This adjustment reflects a positive market response to the company’s performance despite uncertainties about 2025. In another development, Jefferies has upgraded Temenos’ stock rating from Hold to Buy, increasing the price target from CHF63.00 to CHF72.00. This upgrade is attributed to the appointment of Jean-Pierre Brulard as the new CEO, succeeding Andreas Andreades, which is seen as a significant shift in leadership.
The financial firm believes that Temenos is transitioning from short-term profit optimization to more conservative growth targets, supported by increased investment. This strategic change is expected to improve execution and strengthen the company’s foundation. The market is keenly observing whether Temenos can leverage these changes to meet revised growth and performance targets. Analysts are also looking forward to more details on the company’s margin beat and guidance for 2025, which are expected to be disclosed in the full earnings report and conference call scheduled for February 18th.
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