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On Monday, B.Riley, a financial services firm, raised the stock price target for Priority Technology Holdings Inc. (NASDAQ: PRTH) to $13.00, up from the previous $11.00, while maintaining a Buy rating on the company's stock. This adjustment reflects a positive outlook on the company's financial performance and growth potential.
The firm's analyst highlighted that Priority Technology Holdings is well-positioned for a valuation increase as interest rates continue to decline. The company's debt structure, which includes variable-rate debt and redeemable preferred stock, benefits from the tie to the Secured Overnight Financing Rate (SOFR). This financial structure is likely to become more favorable for Priority Technology as interest rates fall.
Moreover, the analyst pointed out that the company is overcoming the impact of losing a low-margin reseller partner in its largest revenue segment, which accounts for approximately 70% of its revenue. This segment, focused on SMB payment processing and merchant acquiring, is expected to resume low double-digit growth rates after a period of stagnation.
Priority Technology's other segments, including Enterprise and B2B Payments, were also noted for their strong performance. These areas are experiencing robust growth due to software-enabled treasury and banking payment services that align with market trends.
The new stock price target of $13 is based on an 8.5x EV/EBITDA multiple applied to the firm's 2025 EBITDA estimate. According to B.Riley's analysis, this price target suggests a significant upside of over 90% compared to their fair value estimate for Priority Technology Holdings' shares.
In other recent news, Priority Technology Holdings, Inc. has reported a record-setting financial performance for the second quarter of 2024, with revenues reaching $219.9 million, a 21% increase from the previous year.
The company attributes this growth to strong performances in the SMB acquiring, B2B Payables, and Enterprise Payments segments. Notably, Priority Technology's unified commerce platform continues to attract customers, processing nearly $125 billion in annual transaction volume and maintaining over $1 million in customer accounts.
Looking ahead, the company has adjusted its full-year revenue outlook to a range of $875 million to $883 million and increased its adjusted EBITDA projection to between $196 million and $200 million. However, Priority Technology anticipates increased operating expenses in the latter half of the year, primarily due to SOX 404 compliance and cloud platform migrations.
Despite potential economic slowdowns impacting the SMB segment, the company aims to mitigate this through high retention rates and market share growth. Furthermore, CFO Tim O'Leary confirmed that the full impact of the company's recapitalization would be seen in Q3, with a preferred dividend of $4.8 million. These recent developments underscore Priority Technology's robust financial performance and promising projections for the future.
InvestingPro Insights
As Priority Technology Holdings Inc. (NASDAQ: PRTH) garners a positive outlook from analysts, recent data from InvestingPro reinforces this sentiment. The company has demonstrated a significant return over the past week, with a price total return of 12.13%. Moreover, investors should note that Priority Technology has experienced a strong return over the last six months, boasting a price total return of 110.28%. These figures indicate a robust short-term performance that aligns with the optimistic analysis provided by B.Riley.
InvestingPro Tips suggest that while the stock generally trades with high price volatility, it has been trading near its 52-week high, with the price reaching 96.43% of this peak. This could be a sign of investor confidence in the company's growth trajectory. However, it is important to consider that analysts do not anticipate the company will be profitable this year, and it has not been profitable over the last twelve months. This context is crucial for investors weighing the potential risks against the growth prospects highlighted by B.Riley.
For those interested in a deeper analysis, InvestingPro offers additional insights and tips on Priority Technology Holdings Inc., which can be found at the dedicated InvestingPro page for the company.
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