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BMO Capital Markets has adjusted its outlook on i3 Verticals (NASDAQ: IIIV), a technology-driven payment and software solutions company, as the firm decreased the price target to $23 from the previous $24 while maintaining a Market Perform rating on the stock.
The revision reflects concerns about the company's near-term revenue progression. BMO Capital noted a slower-than-anticipated revenue trend at RemainCo, leading to a modest reduction in forward adjusted earnings per share (EPS) estimates by 1-2%.
The reassessment comes despite i3 Verticals' fiscal year 2025 guidance, which suggests high single-digit (HSD) revenue growth and mid-teens adjusted EBITDA growth.
The analyst expressed concerns regarding the company's growth trajectory. After accounting for approximately $12 million in revenue headwinds anticipated for fiscal year 2024, the implied revenue guidance for 2025 indicates a year-over-year increase of only 4%.
The firm indicated worries about the time it may take for i3 Verticals to achieve sustainable organic growth that aligns with the long-term HSD target.
The company had reported a slight miss in its fiscal second quarter 2024 results, with revenues reaching $94.5 million. Following this, BMO Capital Markets reduced the price target for i3 Verticals from $25.00 to $24.00. The company's revised FY24 outlook estimates revenues between $380 million and $394 million and adjusted EBITDA between $107 million and $113 million.
In addition, i3 Verticals completed the sale of its Merchant Services segment to Payroc for $440 million. This significant transaction is expected to clear nearly all of the company's estimated $369 million debt, enhancing its financial flexibility for potential mergers and acquisitions.
InvestingPro Insights
As investors digest BMO Capital Markets' revised outlook on i3 Verticals, real-time data from InvestingPro offers additional context. The company's market capitalization stands at $757.55 million, reflecting the scale of its operations within the payment and software solutions industry. Despite a challenging revenue landscape, i3 Verticals has demonstrated a substantial revenue growth of 46.48% over the last twelve months as of Q3 2024, which could signal underlying resilience in its business model.
The InvestingPro Tips highlight that while i3 Verticals has not been profitable over the last twelve months, analysts are optimistic about the company's future, predicting it will become profitable this year. This aligns with BMO Capital's acknowledgement of i3 Verticals' fiscal year 2025 guidance for revenue and adjusted EBITDA growth. Moreover, the company's liquid assets exceed its short-term obligations, suggesting a solid financial position to weather near-term challenges. However, potential investors should be aware of the stock's volatility, as noted in the InvestingPro Tips.
For those interested in a deeper dive, InvestingPro offers additional tips on i3 Verticals, which can be accessed at https://www.investing.com/pro/IIIV. These insights could prove invaluable for understanding the nuances of i3 Verticals' financial health and market potential as the company navigates its growth trajectory.
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