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On Thursday, Keefe, Bruyette & Woods analyst Sanjay Sakrani adjusted the price target for AvidXChange Holdings (NASDAQ:AVDX) shares, reducing it to $8 from the previous $11, while maintaining a Market Perform rating on the stock. This change reflects a more cautious outlook based on the company’s fourth-quarter results and the broader economic environment.
AvidXChange, a provider of accounts payable and payment automation solutions, reported fourth-quarter results that were largely above expectations. The company achieved a solid revenue growth of 15.3% and maintains a healthy gross profit margin of 72.3%. Despite the positive performance, Sakrani noted that the company’s retention rates were below the typical range, hovering below 100% instead of the normal 104-105%. This indicator, combined with an uncertain macroeconomic landscape, contributed to a 2025 outlook that fell short of expectations. InvestingPro analysis shows the company maintains a ’Fair’ overall financial health score, with particularly strong marks in growth metrics.
In light of these factors, Sakrani revised his earnings per share (EPS) estimates for AvidXChange for the years 2025 and 2026. The new estimates are $0.26 and $0.31, down from $0.32 and $0.43, respectively. The reduced price target of $8 is derived by applying a 13x enterprise value/EBITDA (EV/EBITDA) multiple to the firm’s 2026 estimate.
The analyst expressed that the decision to maintain the Market Perform rating was due to the current challenges in the macroeconomic conditions and the lack of clarity on when there might be an improvement in the retention rate or the broader market conditions. This suggests a cautious stance on the stock until there is more visibility on these factors. For deeper insights into AVDX’s valuation and growth prospects, including exclusive ProTips and comprehensive financial analysis, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with expert analysis and actionable intelligence.
AvidXChange’s management has not anticipated any significant changes in the macro environment, neither improvement nor deterioration, in their projections. This conservative approach in the face of uncertain economic conditions appears to have influenced the analyst’s decision to adjust the price target and estimates while keeping the stock rating unchanged.
In other recent news, AvidXchange Holdings reported its fourth-quarter 2024 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.08, exceeding the forecasted $0.07. The company achieved a revenue of $115.4 million, slightly above the anticipated $114.84 million, marking a 10.9% year-over-year growth. Despite this financial performance, AvidXchange’s fiscal year 2025 revenue guidance, set between $453 million and $460 million, fell short of analyst expectations, leading BTIG to adjust its price target to $11 while maintaining a Buy rating. KeyBanc Capital Markets downgraded the company’s stock rating from Overweight to Sector Weight due to concerns over the FY25 guidance and challenges impacting growth. Analysts from KeyBanc noted macroeconomic difficulties and a slower rate of new customer additions as factors influencing their decision. They also highlighted positive developments such as increased payment revenue monetization and new product launches, although the timeline for these benefits remains uncertain. AvidXchange’s management remains optimistic about acquiring new customers and maintaining a stable core payments take rate, which could alleviate concerns about potential payment challenges.
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