Monday, UBS initiated coverage on Procore Technologies , Inc. (NYSE:PCOR) with a Buy rating and a price target of $105.00. The stock has shown impressive momentum, delivering a 34% return over the past year and currently trading near its 52-week high of $83.35. According to InvestingPro data, 12 analysts have recently revised their earnings estimates upward for the upcoming period.
The new outlook is based on the anticipation of growth in construction volume, which is expected to positively impact Procore's spending. Analysts at UBS predict a significant uptick in growth for the coming year, forecasting a 16% increase as opposed to the 9% growth seen this year.
The company maintains strong fundamentals with an impressive 82% gross profit margin and holds more cash than debt on its balance sheet. InvestingPro analysis indicates the company's overall financial health score is "GOOD," suggesting solid operational performance.
The analysis suggests that Procore's expenditure is closely linked to the growth of construction volumes, with expectations of a spending inflection point around Calendar Year 2025 or upon renewal of contracts. This inflection is anticipated to potentially bring spending growth back to or beyond 30%, a rate previously seen in the sector.
However, there are factors that might temper this growth acceleration. These include a return to normalcy in construction modernizations, increased competition, and the mechanics of Procore's pricing model, which may discourage down-selling. Additionally, the effectiveness of cross-selling strategies has been called into question, particularly in light of the company's recent reorganization.
Moreover, the interest in financial add-ons appears to be lukewarm, with the exception of Procore's nascent 'Pay' feature. This feature is still in its early stages and has not yet garnered widespread adoption or interest.
In summary, UBS has taken a positive stance on Procore Technologies, citing expected growth in construction volume as a key driver for the company's performance. The firm has set a confident price target for Procore's shares, reflecting the optimism surrounding the company's prospects in the near future.
While current metrics suggest the stock is trading at premium valuations, InvestingPro subscribers can access 10+ additional exclusive insights and a comprehensive Pro Research Report for deeper analysis of PCOR's growth trajectory and market position.
In other recent news, Procore Technologies has experienced significant developments. The company reported a 19% surge in Q3 2024 revenue, reaching $296 million, and a 26% increase in international earnings.
Several analyst firms have adjusted their price targets for Procore, reflecting the company's growth prospects. DA Davidson maintained a neutral rating on Procore shares while raising the target from $60.00 to $70.00.
Mizuho (NYSE:MFG) also raised the stock price target to $65, maintaining a neutral rating. BMO Capital Markets and TD Cowen maintained positive ratings, raising their price targets to $85 and $82, respectively. Piper Sandler increased its target to $90, and Jefferies adjusted their target to $80.
These revisions follow Procore's strategic plan to reaccelerate growth, with FY 2025 revenue projected to hit $1.275 billion, representing an 11% growth rate. The company aims to improve non-GAAP operating margins to 13% and has announced a $300 million stock buyback program.
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