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On Thursday, D.A. Davidson reaffirmed its confidence in Vertex (NASDAQ:VRTX) Inc. (NASDAQ: VERX), maintaining a Buy rating and a $55.00 price target for the company's shares. Currently trading at $38.52, the stock sits well below the consensus analyst target range of $31-$61. The firm's analyst, William Jellison, highlighted Vertex's inclusion on the Best-of-Breed Bison list, a selection of companies that exhibit exceptional business qualities. This list is determined by 12 specific criteria and an internal committee vote. According to InvestingPro data, the stock has shown strong momentum with a 20.5% return over the past year, despite recent volatility.
Jellison pointed out Vertex's core business of automating indirect tax processes for enterprises as a straightforward and outstanding business opportunity. The market for indirect tax software is substantial, with a $23 billion total addressable market (TAM) and an additional $7 billion potential in e-invoicing. A significant portion of this TAM is currently served by in-house solutions, indicating a large market available for Vertex's offerings. The company's revenue growth reflects this opportunity, with InvestingPro showing a 16.5% year-over-year increase to $666.8 million, maintaining a strong 64% gross margin.
The analyst praised Vertex for its robust and predictable revenue streams, noting the company's resilience over its 40-year history. Vertex has demonstrated growth even during challenging economic times, such as the Global Financial Crisis (GFC), and is now positioned in the top decile of growth within the Vertical Software (ETR:SOWGn) sector. InvestingPro analysis reveals the company operates with moderate debt levels and maintains a healthy Altman Z-Score of 4.79, indicating strong financial stability. While currently not profitable, analysts expect positive earnings this year.
The valuation of Vertex was also a point of emphasis, with Jellison citing a discounted cash flow (DCF) model to suggest that the company's intrinsic value is higher than its current market valuation. He indicated that a private buyer might value the entire company at around $10 billion, translating to a share price between $55 and $60 in an arm's length transaction.
Vertex Inc.'s stock price target and rating by D.A. Davidson reflect the firm's positive outlook on the company's market position, growth potential, and financial resilience.
In other recent news, Vertex Inc. has been the subject of several analyst reports following its first Investor Day and analyst day events. DA Davidson reaffirmed its Buy rating with a $55 price target, highlighting Vertex's strategic investments in e-invoicing and AI as key growth drivers. BMO Capital Markets maintained a Market Perform rating with a $41 target, noting the ambitious nature of Vertex's long-term targets and a cautious short-term outlook. Citizens JMP reiterated a Market Outperform rating with a $61 price target, supported by positive projections for 2028, including a 15% revenue growth expectation. Needham also maintained a Buy rating and a $60 target, expressing confidence in Vertex's product differentiation and strategic investments leading to significant growth by 2028. Meanwhile, Stifel kept a Hold rating with a $31 target, acknowledging the company's long-term growth strategy but highlighting the need for patience as accelerated growth is expected post-2026. These recent developments underscore varying levels of optimism among analysts regarding Vertex's future performance and strategic direction.
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