On Wednesday, B.Riley maintained a Buy rating on AudioEye (NASDAQ:AEYE) and raised the stock price target to $18.50 from $14.00, following the company's release of better-than-expected first quarter results.
AudioEye, a company specializing in digital accessibility solutions, reported its first quarter earnings after the market closed on Tuesday, with both revenue and adjusted EBITDA surpassing consensus estimates.
The firm highlighted that the positive results were driven by growth in the partner/marketplace and enterprise channels, as well as continued operational expenditure leverage. In response to these strong financial outcomes, AudioEye's management has increased the full-year 2024 revenue and adjusted EBITDA guidance. The company is on track to potentially conclude the fiscal year with high-teen year-over-year revenue growth and a similarly strong adjusted EBITDA margin.
Following the announcement, shares of AudioEye surged nearly 14% in after-hours trading, adding to the approximately 13.8% rise during Tuesday's trading session. This increase contrasted with the Russell 2000 Index, which was up 1.8%. Investors appear to be reacting to the anticipated demand tailwinds from the Department of Justice's final rule on Title II of the American Disabilities Act (ADA), which is expected to have a significant impact in fiscal year 2025 and beyond.
Although AudioEye did not provide specific guidance, management has expressed ambitions to exceed the Rule of 40—a benchmark indicating strong performance by measuring combined revenue growth and adjusted EBITDA margin—in fiscal year 2025.
With the company's partners currently serving over 80,000 websites that need to comply with accessibility regulations in the next two to three years, there is potential for accelerated revenue growth and margin expansion in the future.
B.Riley has adjusted its fiscal year 2024 and 2025 estimates for AudioEye, citing the company's consistent solid execution, upcoming regulatory demand tailwinds, and the potential for the stock to continue its upward trajectory over the next year.
The new price target is based on a projected enterprise value to sales multiple of approximately 5.25 times for fiscal year 2025, an increase from the previous multiple of around 4.25 times. Despite AudioEye's shares already climbing nearly 150% year-to-date, outperforming the Russell 2000 Index which is down about 1.2%, B.Riley believes there is room for additional growth in the stock's value.
InvestingPro Insights
As AudioEye (NASDAQ:AEYE) captures investor attention with its strong Q1 performance and raised guidance for the year, InvestingPro data adds depth to the narrative. The company's market capitalization stands at a solid $157.02 million, reflecting its growing presence in the digital accessibility space.
Despite a negative P/E ratio of -26.51, indicating that the company is not currently profitable, analysts remain optimistic. This optimism is underpinned by a substantial gross profit margin of 77.76% in the last twelve months as of Q1 2024, showcasing the company's ability to maintain profitability at the operational level.
Investors tracking the stock's trajectory will note the significant price total return over the last three months, an impressive 162.77%, and an even more remarkable six-month return of 193.04%. These figures suggest a strong market confidence in AudioEye's growth potential. The InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, and predict the company will be profitable this year.
Moreover, the company's impressive gross profit margins and significant returns over various time frames bolster the case for its positive outlook. For those looking to delve further into the company's financials and future prospects, InvestingPro offers 9 additional tips, available on their platform.
Interested investors and analysts can find further insights and leverage the full suite of InvestingPro tools to make more informed decisions. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more value as you explore the potential of AudioEye and other investment opportunities.
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