On Friday, DA Davidson adjusted its stance on ACI Worldwide (NASDAQ: NASDAQ:ACIW) shares, shifting the rating from Buy to Neutral, while also raising the price target to $60 from the previous $57. This decision followed ACI Worldwide's third-quarter earnings report, which showcased a 24% year-over-year increase in revenue and a notable 61% jump in adjusted EBITDA, surpassing the analyst's expectations.
The company's substantial growth in high-margin Software (ETR:SOWGn) License fees, which saw a 98% year-over-year increase, was highlighted as a key driver of the positive performance. This growth is attributed to high renewal activity within the company's client base.
Despite these strong results, DA Davidson believes that the significant appreciation in ACI Worldwide's share price, which has climbed 140% over the past year, already reflects the company's improved growth prospects.
The analyst from DA Davidson expressed confidence in ACI Worldwide's trajectory, anticipating strong growth and robust margins over the next two to three years. However, the current share price is thought to incorporate much of this optimistic outlook, leading to the revised Neutral rating.
ACI Worldwide's recent performance suggests a solid operational footing, with the firm achieving better than anticipated financial outcomes. The increased price target to $60, up from $57, indicates a belief in the company's value, albeit with a more conservative rating given the stock's impressive run-up over the past twelve months.
In other recent news, ACI Worldwide has reported a robust growth for its third quarter. The company saw a 24% increase in total revenue, reaching $452 million, and a significant 61% rise in adjusted EBITDA to $167 million.
The Bank segment led this growth, noting a 72% increase in real-time payments. This positive performance led ACI Worldwide to raise its full-year 2024 revenue guidance to between $1.567 billion and $1.601 billion, and adjusted EBITDA to between $433 million and $448 million.
Furthermore, the company expressed confidence in its sales pipeline for 2025, with plans to provide further guidance in February. ACI Worldwide also highlighted that its Payments Hub is nearing completion, with pilot implementations expected in Q2 2025.
Despite the current minimal contributions from mid-tier banks and a stringent European regulatory environment, ACI remains optimistic about potential regulatory changes following the recent U.S. election. These recent developments underscore ACI Worldwide's strong performance and strategic positioning in the global payments market.
InvestingPro Insights
ACI Worldwide's recent performance aligns with several key metrics and insights from InvestingPro. The company's strong financial results are reflected in its market performance, with InvestingPro data showing a remarkable 142.13% price total return over the past year. This aligns with DA Davidson's observation of the stock's 140% appreciation.
The company's robust growth is further evidenced by its revenue growth of 13.31% over the last twelve months, with a particularly strong quarterly revenue growth of 24.44% in Q3 2024. This corresponds with the 24% year-over-year increase in revenue mentioned in the article.
InvestingPro Tips highlight that ACI Worldwide has a perfect Piotroski Score of 9, indicating strong financial health. Additionally, the company is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.22, suggesting potential undervaluation despite the recent price surge.
For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips for ACI Worldwide, providing a deeper understanding of the company's financial position and market dynamics.
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