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Tuesday, Scotiabank (TSX:BNS) analyst Joe Vandrick adjusted the price target for N-Able Inc. (NYSE:NABL) to $8.75, down from the previous $11.00, while maintaining a Sector Perform rating on the company’s shares. The stock, currently trading at $7.20, has experienced a significant 29% decline over the past week. The revision follows the release of N-Able’s fourth-quarter results, which slightly exceeded expectations, with the company achieving impressive revenue growth of 10.5% and maintaining strong gross margins of 83.5%. Despite this, the company’s revenue and EBITDA guidance for 2025 fell short of market predictions. According to InvestingPro analysis, the stock appears undervalued at current levels.
Vandrick pointed out that the guidance suggests a roughly 20% year-over-year decline in EBITDA, which may be a cause for concern among investors who prioritize the company’s financial performance. The analyst highlighted that 2025 is anticipated to be a year of investment for N-Able as it works on integrating Adlumin, enhancing channel partnerships, and establishing a new development site in India. Despite these challenges, InvestingPro data shows the company maintains a healthy financial position with a solid Altman Z-Score of 4.63 and a favorable debt-to-equity ratio of 0.49.
While recognizing N-Able’s robust products in Remote Monitoring and Management (RMM) and backup solutions, Vandrick noted the challenges posed by a competitive market. The presence of other credible Managed Service Provider (MSP) software providers appears to be a barrier for N-Able in achieving significant market share gains.
In his commentary, Vandrick reiterated his view that the risk/reward balance for N-Able remains neutral. This assessment takes into account the company’s potential growth from the acquisition of Adlumin but tempers it with the competitive pressures within the industry. As a result, the Sector Perform rating stands, reflecting a cautious but not negative outlook on the stock’s future performance.
In other recent news, N-Able Inc. reported its fourth-quarter 2024 earnings, revealing an earnings per share (EPS) of $0.10, which exceeded analyst expectations of $0.08. The company’s revenue for the quarter reached $116.5 million, slightly surpassing the consensus estimate of $113.71 million. However, N-Able’s revenue guidance for the first quarter of 2025, projected at $115-116 million, fell short of the anticipated $120.4 million. The full-year 2025 revenue forecast of $486.5-492.5 million also came in below the consensus estimate of $512.2 million.
In light of these developments, BMO Capital Markets adjusted its outlook on N-Able, reducing the price target from $13.50 to $8.50 while maintaining a Market Perform rating. The revision reflects concerns about the company’s future revenue growth and adjusted EBITDA margin, despite the potential benefits of the Adlumin acquisition. N-Able’s acquisition of Adlumin is expected to enhance its security and IT management platform, with the company aiming to leverage this to expand its market presence.
Despite the positive earnings report, the stock experienced a significant decline, attributed to the cautious revenue outlook for 2025. N-Able’s CEO, John Pagliuca, remains optimistic about the company’s prospects, emphasizing investments in security leadership and channel partnerships. The company’s financial outlook for 2025 includes an adjusted EBITDA margin of 27% to 28%, with expectations for annual recurring revenue growth of 7% to 9% year-over-year. As N-Able navigates these challenges, investors will be closely monitoring its ability to achieve projected growth and profitability.
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