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Wells Fargo has adjusted its outlook on Bill.com Holdings Inc. (NYSE: NYSE:BILL), reducing the price target to $45.00 from the previous $60.00, while keeping an Underweight rating on the stock.
The firm's assessment suggests a conservative stance on the company's growth prospects, contrasting with more optimistic views that anticipate a return to robust expansion.
The financial institution's analysis indicates a belief that investors will likely shift their expectations to lower double-digit growth over the medium term for Bill.com. The outlook is based on current market conditions and comparisons with other companies that present more appealing risk/reward profiles at lower valuations.
Wells Fargo pointed to Bill.com's current EBITDA multiple of 19 times the calendar year 2025 estimates, which they find high compared to their own estimate of 17 times. The firm anticipates that this multiple is more prone to contraction rather than expansion, given the company's growth and valuation metrics.
The revised price target of $45.00 is derived from a multiple of 4 times the firm's calendar year 2025 gross profit estimate of $1.3 billion and 17 times their estimate for the company's calendar year 2025 EBITDA.
Bill.com recently initiated a repurchase of approximately $235 million worth of its convertible notes due in 2025, reducing the remaining notes set to mature in December 2025 to $172 million. In addition, Sarah Acton has been appointed as Chief Customer Officer, a strategic move aimed at enhancing the company's engagement with small and midsize businesses.
On the analyst front, Wolfe Research downgraded Bill.com shares from Outperform to Peer Perform, citing concerns about sustainable growth, and revised the price target range between $46 and $56. Meanwhile, Needham maintained a Buy rating on Bill.com with a $100 price target, emphasizing the company's potential to increase its take rates and innovate using artificial intelligence. Oppenheimer lowered its price target to $70 due to market uncertainties, but maintained an Outperform rating, and Baird adjusted its price target to $68, expecting the company to surpass Q4 revenue and EBITDA expectations.
InvestingPro Insights
As investors consider the recent outlook adjustment by Wells Fargo on Bill.com Holdings Inc. (NYSE: BILL), it's worth noting that InvestingPro data and tips offer a comprehensive view of the company's financial health and market position. Bill.com's market capitalization stands at $5.34 billion, and despite a negative P/E ratio of -102.92, the company's robust gross profit margin of 85.76% over the last twelve months as of Q3 2024 underscores its ability to maintain high profitability on its core services and products.
InvestingPro Tips highlight that Bill.com holds more cash than debt on its balance sheet, a sign of financial stability, and management's aggressive share buybacks could signal confidence in the company's value. Additionally, while the stock price has experienced significant volatility, with a 1 Year Price Total Return of -54.24% as of the latest data, analysts predict Bill.com will be profitable this year, which could provide a positive catalyst for the stock.
For those seeking further analysis, InvestingPro offers additional insights, including 9 more InvestingPro Tips available at https://www.investing.com/pro/BILL, which could help investors make more informed decisions regarding their investment in Bill.com.
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