On Thursday, Baird increased the price target for shares of Q2 Holdings (NYSE:QTWO) to $65.00, up from the previous $60.00, while reiterating an Outperform rating. The firm's decision follows Q2 Holdings' first-quarter performance, which showcased a 13% increase in Subscription revenue, surpassing expectations by 3%. The company also reported EBITDA margins of 15%, a significant improvement from 11% year-over-year and above the consensus estimate of 14%.
Q2 Holdings has demonstrated robust deal momentum, highlighted by securing four Tier 1 wins and a record number of Tier 2 and Tier 3 deals compared to any quarter in the previous year. This success is reflected in the company's reported obligations (RPO) growth, which accelerated to 25% year-over-year, an increase from 23% in the fourth quarter.
Looking forward, Q2 Holdings has updated its full-year 2024 revenue and EBITDA guidance. The company now anticipates Subscription revenue growth to exceed 14% year-over-year, a revision from the previously forecasted 13%+. The adjustment comes on the back of strong first-quarter bookings, which have bolstered confidence in the company's potential for accelerating growth in FY25.
The analyst from Baird cited the company's first-quarter bookings activity as a key factor in reinforcing their positive outlook on the stock. They also noted that Q2 Holdings' EBITDA and free cash flow (FCF) are tracking significantly higher, indicating a robust financial trajectory for the company.
InvestingPro Insights
As Q2 Holdings (NYSE:QTWO) continues to impress with its first-quarter performance and upward trajectory in Subscription revenue, InvestingPro data provides further insights into the company's financial health and market position. The market capitalization stands at a solid $3.11 billion, reflecting the company's significant presence in the industry. Despite a negative P/E ratio of -46.98, indicating that the company is not currently profitable, analysts are optimistic about its future, predicting profitability this year. This optimism is supported by a strong revenue growth rate of 8.98% over the last twelve months as of Q1 2024.
InvestingPro Tips highlight that net income is expected to grow this year, and four analysts have revised their earnings upwards for the upcoming period. This aligns with the positive sentiment expressed by Baird's analyst regarding Q2 Holdings' financial outlook. Additionally, the company's high return over the last year, with a price total return of 129.91%, suggests that investors have been rewarded for their confidence in the company's performance.
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