Needham maintains Asure Software buy rating and $20 target

On Friday, Needham reiterated a Buy rating on Asure Software (NASDAQ:ASUR) with a steady price target of $20.00, representing significant upside potential from the current price of $9.69. According to InvestingPro data, analysts maintain a strong buy consensus with a 1.33 rating, while the stock appears undervalued based on InvestingPro’s Fair Value analysis. The firm’s analyst highlighted the company’s fourth-quarter performance, which aligned with forecasts, despite recurring revenue falling short of estimates and professional services exceeding expectations. This discrepancy was attributed to partner-related work expanding enterprise payroll tax opportunities.

Asure Software’s Q4 recurring revenue was impacted by an acquisition that was expected to close within the quarter but did not progress beyond the letter of intent (LOI). Despite this setback, management has upheld their initial financial guidance for the fiscal year 2025, anticipating a stronger performance in the second half. This projection accounts for anticipated challenges, such as reduced revenue from Forms/W-2 and slower growth in HR Compliance, which has been affected by customer churn from previously sold bundles that included the Employee Retention Tax Credit (ERTC). InvestingPro analysis shows impressive gross profit margins of 68.55%, suggesting strong operational efficiency despite these challenges.

The analyst noted a positive outlook for Asure Software’s gross margin, which is expected to rise over the year as products with higher margins gain traction. Furthermore, the company experienced an acceleration in organic growth excluding ERTC, which reached 9% year-over-year in 2024. The guidance for fiscal year 2025 assumes a 6% rate of organic growth.

Needham’s stance is buoyed by these factors, which suggest a potential increase in profitability and a solid growth trajectory for Asure Software. Despite the challenges faced in the fourth quarter and the acquisition that did not close as planned, the firm’s maintained guidance and expected margin improvements provide a basis for the Buy rating and $20 price target.

In other recent news, Asure Software Inc . reported a significant miss in its fourth-quarter 2024 earnings per share (EPS), posting -$0.12 compared to the anticipated $0.19. Revenue for the quarter was slightly below expectations at $30.79 million, just under the forecasted $30.8 million. Despite these results, the company achieved a 17% increase in total revenues over the previous year, reaching $119.8 million in 2024. Recurring revenues grew by 15%, now representing 96% of total revenues, up from 84% in 2023. Additionally, Asure Software faced a full-year net loss of $11.8 million, an increase from the $9.2 million loss recorded in 2023.

The company’s strategic initiatives included the introduction of new products like AssurePay and Luna, and a focus on client acquisition and cross-selling opportunities. Asure Software has set a revenue guidance range of $134-$138 million for 2025, indicating mid-teens growth. The company is also exploring a credit facility between $20 million and $60 million to support its growth strategies. In terms of market analysis, despite the earnings miss, Asure Software is aiming for EBITDA margins of 23-24% in 2025, with a long-term target of $180-$200 million in revenue and 30% EBITDA margins.

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