KeyBanc maintains Overweight rating on Certara shares with $15 target

On Friday, KeyBanc Capital Markets reiterated its Overweight rating on shares of Certara Inc . (NASDAQ: NASDAQ:CERT), maintaining a $15.00 price target. The endorsement comes after the company pre-reported fourth-quarter top-line results earlier in January. According to InvestingPro data, the stock currently trades at $11.98, with analysts’ targets ranging from $12 to $17, suggesting potential upside. Analysis indicates the stock is currently undervalued based on InvestingPro’s Fair Value model. Certara’s fourth-quarter adjusted EBITDA matched consensus estimates at $87 million, and the firm experienced a significant year-over-year growth in bookings. Total (EPA:TTEF) bookings for the quarter increased by approximately 22%, driven by a notable 38% surge in software bookings—the highest since the fourth quarter of 2021—and a 12% increase in services bookings. The company maintains a healthy gross profit margin of nearly 60% and has demonstrated solid revenue growth of 8.7% over the last twelve months.

Certara’s regulatory business also marked its first year-over-year growth in several quarters, posting a mid-single-digit (MSD) increase. Despite observing continued cautious spending behavior among customers throughout 2024 and extended decision-making timelines, Certara has not detected any shifts in customer sentiment that would significantly alter the outlook for its end markets in fiscal year 2025 (FY25). The company’s revenue guidance for FY25, which aligns with top- and bottom-line expectations, reflects this steady sentiment.

As Certara evaluates the future of its regulatory writing business, no definitive decisions have been made. KeyBanc highlighted several factors that could drive revenue growth for Certara, including a robust software backlog set to convert into revenue in FY25, the development of new software products with higher margins, and the expansion and integration of software modules on the Certara Cloud platform. With a market capitalization of $1.92 billion and an overall "GOOD" financial health rating from InvestingPro, which offers comprehensive analysis through its Pro Research Reports covering 1,400+ US stocks, the company appears well-positioned for future growth. Additionally, a more unified salesforce is expected to enhance cross-selling strategies.

KeyBanc’s $15 price target for Certara stock is based on approximately a 6x multiple of the firm’s FY25 revenue estimate, indicating confidence in the company’s growth potential despite current market challenges. For deeper insights into Certara’s valuation metrics and growth prospects, investors can access detailed financial analysis and ProTips through InvestingPro.

In other recent news, Certara Inc. reported strong fourth-quarter earnings for 2024, surpassing market expectations with an earnings per share (EPS) of $0.15, compared to the forecasted $0.12. The company’s revenue reached $100.4 million, exceeding the anticipated $97.92 million, marking a 14% year-over-year growth. Certara also provided optimistic revenue guidance for 2025, projecting total revenue between $415 million and $425 million, with contributions from its Chemexon integration expected to add $23-$25 million. In analyst updates, TD Cowen initiated coverage on Certara with a Buy rating and a price target of $16.00, highlighting the potential of Certara’s Model-Informed Drug Discovery (NASDAQ:WBD) and Development platform. The analysts emphasized Certara’s strategic focus on artificial intelligence compatibility as a competitive advantage in the biosimulation space. Certara’s ongoing review of its regulatory services business is noted as a potential factor for a more favorable revenue mix. These developments come as Certara continues to expand its customer base, launching new products and investing in software development to enhance its competitive positioning in the biopharmaceutical industry.

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