Bill.com stock under pressure as revenue growth slows - Mizuho

On Wednesday, Mizuho adjusted its outlook on Bill.com Holdings Inc. (NYSE: NYSE:BILL) stock, reducing the price target to $52 from the previous $60, while maintaining a neutral stance.

The adjustment follows Bill.com's financial results for the fourth quarter, which surpassed consensus revenue estimates, mainly due to higher transaction revenue.

Despite the positive revenue performance, Bill.com's net revenue retention (NRR) rate experienced a decline, dropping to 92% compared to 111% in the fiscal year 2023. Additionally, the company's initial guidance for fiscal year 2025 anticipates a year-over-year revenue growth of 10-12%, or 15-17% for core revenue growth, which falls short of the market consensus.

In response to the current business climate, Bill.com plans to invest approximately $45 million in fiscal year 2025 with the goal of reaccelerating growth to reach its target of around 20% in fiscal year 2026. Alongside this investment, the company has announced a new $300 million share buyback program.

The firm's decision to lower its price target reflects the revised growth estimates provided by Bill.com's management for fiscal years 2025 and 2026. The report acknowledges the company's efforts to stimulate growth but expresses concerns that the challenging macroeconomic environment and competition from Intuit (NASDAQ:INTU) could impact Bill.com's long-term growth prospects.

In other recent news, Bill.com has been in the spotlight due to its latest earnings and revenue results, strategic moves, and analyst ratings. The company's fourth fiscal quarter results revealed a total revenue of $344 million, a 16% increase year-over-year, exceeding expectations.

However, Bill.com's guidance for fiscal year 2025 fell short of Seaport Global Securities' estimates, prompting a price target reduction to $68, though the Buy rating was maintained.

The company also announced a new $300 million stock buyback program and plans for $45 million in incremental investments. In a recent development, Bill.com revealed an expansion agreement with Bank of America and a strategic partnership with Xero to enhance its platform.

Despite a downward adjustment for fiscal year 2025, Bill.com's management remains optimistic, predicting over 20% growth in core revenue for fiscal year 2026.

Analysts from Needham also maintain a Buy rating for the company, underscoring strong demand and growth prospects. These recent developments indicate a dynamic period for Bill.com as it navigates the financial landscape.

InvestingPro Insights

As Bill.com Holdings Inc. (NYSE: BILL) navigates through its current financial landscape, InvestingPro data and tips provide a deeper understanding of the company's performance and potential. Notably, Bill.com's market capitalization stands at $5.71 billion, indicating its significant presence in the market. Despite not being profitable over the last twelve months, the company boasts impressive gross profit margins of 85.3%, reflecting its ability to maintain a high level of operational efficiency.

InvestingPro Tips highlight that management's share buyback initiative aligns with its strategy to enhance shareholder value, which is further supported by the company holding more cash than debt on its balance sheet. Furthermore, with analysts expecting net income growth this year, there is a sense of optimism around the company's profitability prospects. On the other hand, the stock has experienced notable volatility and a considerable price drop over the past year, yet the InvestingPro product lists additional tips, including 9 analysts revising their earnings downwards for the upcoming period, which could be of interest to potential investors.

Considering these factors, the InvestingPro product offers a comprehensive collection of 11 additional tips, which could be pivotal for investors seeking a detailed analysis of Bill.com. With the next earnings date set for October 31, 2024, and a fair value estimation of $61.33, significantly higher than the current price of $53.48, investors have critical data points to consider when evaluating the company's stock. As Bill.com continues to implement its growth strategy, these insights may prove valuable in assessing the company's trajectory in the challenging economic climate.

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