By Sam Boughedda
Q2 Holdings (NYSE:QTWO) missed third-quarter expectations and lowered full-year targets when it reported earnings after the close on Monday.
The earnings release resulted in Q2 shares tumbling Tuesday, opening up the session at around the $21.13 mark. They are currently at $23.80, down almost 10% on the day.
Following the release, Piper Sandler downgraded Q2 to underweight, cutting its price target on the stock to $22 from $45 per share. Analysts there told investors that some of Q2's larger financial clients slowed discretionary spending given persistent macro headwinds.
"Specifically, 'several key customers' started to push out spend and European sales remain pressured. The company also lowered the bar for FY23 revenues given transactional and services revenue headwinds. While we have lowered our FY23 revenue targets from $680M to $647M, we think that there could be further downside to our estimates," wrote the analysts.
RBC Capital Markets analysts downgraded the stock to Sector Perform from Outperform, cutting the firm's price target to $32 from $38. They stated: "While the Q3/22 print was mixed (revenue below expectations, adj. EBITDA above), management lowered FY22 guidance citing large banks deferring discretionary projects, weakness in Europe and pressure on transaction revenues. Given these macro conditions, we are downgrading the shares to Sector Perform from Outperform and lowering our estimates and price target."
Stephens analysts lowered the firm's price target on Q2 shares to $30 from $55. They told investors in a note that they expect shares of QTWO to come under pressure following a weaker-than-expected 3Q revenue result and material reduction to the outlook.
"While the core subscription business (+16.4% Y/Y) remains strong, revenue was weaker than expected in Billpay, Helix, consulting/ discretionary (service rev.) and Europe (~3% of total), resulting in an ~$8M revenue headwind in 4Q. We expect a pullback in European spend and other cost initiatives to drive 300-400bp margin expansion in '23, but now see revenue growth in the ~13%-14% range for the FY, in line with '22 levels and below prior est. of +18% growth," added the analysts.
Finally, KeyBanc Capital Markets analysts maintained the firm's Sector Weight rating on the shares but said macro pressures are weighing heading into 2023.
"QTWO missed top-line expectations as transactional and services-based revenues came in behind expectations leading to better-than-expected margins in the quarter. Macro commentary on the call spoke to headwinds in Europe, pressure on discretionary spend projects, and lower transaction volumes," wrote the analysts.