On Thursday, Citi has increased its price target for Appian Corp . (NASDAQ:APPN) to $53.00, up from the previous $40.00, while reiterating a Buy rating on the stock. This adjustment comes in the wake of Appian's robust third-quarter performance, which surpassed expectations, particularly in Cloud revenue and EBITDA margin.
Appian's third-quarter results demonstrated a 4.3% Cloud revenue upside compared to consensus estimates and a 6 percentage point beat on EBITDA margin. These figures have led to an improved margin outlook, with expectations for the company to become EBITDA positive in around 2024, an upgrade from the previous forecast of merely breaking even.
The company also reported strong short-term subscription billings, exceeding estimates by 2%, and a surge in short-term subscription bookings. Notable growth areas included a 24% year-over-year increase in Federal sector revenue, advancements in Data Fabric and Artificial Intelligence (AI), and a positive response to the new pricing structure, particularly the Advanced tier.
Citi's analysis indicates that Appian's go-to-market (GTM) execution was less disrupted than anticipated, countering the conservative expectations set after the previous quarter's guidance was adjusted downward. With the new Chief Revenue Officer (CRO) at the helm, there is an expectation for further stabilization and systematic improvements in the company's GTM strategy.
The encouraging results and the potential for increased AI monetization have led Citi to raise the price target for Appian shares, signaling confidence in the company's future performance and execution capabilities.
In other recent news, Appian Corporation reported impressive growth in its third quarter of 2024, with a significant rise in cloud subscription revenue and total revenue. The firm's CEO Matt Calkins attributed this success to the company's effective enhancement of AI through its platform, leading to substantial contracts and a positive adjusted EBITDA surpassing expectations. Notably, cloud subscription revenue soared by 22% year-over-year to $94.1 million, while total revenue witnessed a 12% increase to $154.1 million.
Despite a slight decline in professional services revenue, the company's subscription revenue, which accounted for 80% of the total revenue, increased by 19% to $123.1 million. Furthermore, the cloud subscription revenue retention rate remained strong at 117%.
In light of these developments, Appian has raised its full-year guidance for 2024, projecting positive adjusted EBITDA and expecting cloud subscription revenue to be between $364 million and $366 million. Total (EPA:TTEF) revenue for the year is anticipated to range between $613 million and $615 million.
InvestingPro Insights
Appian Corp.'s recent performance and Citi's upgraded price target are further supported by real-time data from InvestingPro. The company's market cap stands at $3 billion, reflecting investor confidence in its growth potential. Appian's revenue for the last twelve months as of Q2 2024 reached $578.7 million, with a notable revenue growth of 14.23% over the same period. This aligns with the strong third-quarter performance mentioned in the article.
InvestingPro Tips highlight that 4 analysts have revised their earnings upwards for the upcoming period, which corroborates Citi's positive outlook. Additionally, Appian's stock has shown a significant return over the last week and is trading near its 52-week high, with a strong return over the last three months (49.78% price total return). These metrics underscore the market's positive reaction to Appian's recent performance and future prospects.
It's worth noting that while Appian operates with a moderate level of debt, it was not profitable over the last twelve months, with an operating income margin of -14.39%. This aligns with the article's mention of the company's path towards EBITDA positivity around 2024.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Appian Corp., providing a deeper understanding of the company's financial health and market position.
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