On Wednesday, Goldman Sachs (NYSE:GS) downgraded shares of E2open Parent Holdings (NYSE: ETWO), moving the rating from Neutral to Sell. The firm also reduced the price target to $2.90, a decrease from the previous $3.50 target. Currently trading at $3.13, the stock has fallen over 30% in the past six months, according to InvestingPro data. The downgrade comes amid concerns about the company's ability to achieve significant growth in the near future.
The analyst from Goldman Sachs indicated that E2open's shares are expected to continue facing pressure. This outlook is attributed to a combination of factors, including historically low retention levels, challenges in organic sales, and a constrained balance sheet. With revenue declining by 4.69% and the company currently unprofitable, these issues are anticipated to hinder the company's return to meaningful growth within the next 12 to 18 months.
E2open's management has been acknowledged for taking steps towards improving sales performance and customer success. These efforts are aimed at stabilizing the company's revenue after experiencing six consecutive quarters of decline. However, the potential for growth beyond low-single digits through strategies such as upsell, cross-sell, and normalization of pipeline conversion remains uncertain.
The operating environment is also a concern, as it continues to be influenced by increased buyer scrutiny, prolonged sales cycles, and competition from faster-growing peers. These factors contribute to the challenges E2open faces in attempting to recover and expand its market share. Discover comprehensive valuation metrics and 12+ additional key insights about ETWO with InvestingPro, including detailed Fair Value analysis and growth potential indicators.
The analyst further noted that E2open has traditionally relied on acquisitions to drive growth. However, the current high-interest rate environment has increased the company's leverage, limiting its ability to reduce debt and meet leverage targets.
This financial constraint also affects E2open's capacity to acquire and integrate additional supply chain software assets into its customer base, which could otherwise potentially stimulate growth.
In other recent news, E2open Parent Holdings has been the focus of analysis by Loop Capital, which maintained its Hold rating for the company.
Recently, E2open reported mixed earnings results, with subscription revenue reaching $131 million and adjusted EBITDA standing at $55 million. However, the company fell short of total revenue projections by $4 million and adjusted its total revenue forecast for FY25 downward by $26 million due to challenges in bookings and professional services.
Loop Capital's analysis suggests the near future may not bring significant changes for E2open, which is currently one year into a multi-year rebuilding process. Despite these challenges, E2open's management remains optimistic about improving retention rates and efforts to revitalize the sales structure.
In other financial news, E2open reported Q2 earnings for fiscal year 2025. Despite a slight decline in subscription revenue year-over-year to $131.6 million, the company saw an increase in quarterly subscription bookings. The company's management projects Q3 subscription revenue to be between $130 million and $133 million, with full-year guidance revised to $526 million to $532 million.
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