On Tuesday, Barclays (LON:BARC) maintained its Equalweight rating and a $35.00 price target for Alkami Technology Inc (NASDAQ: ALKT), emphasizing key points regarding the company's second-quarter performance.
The financial institution predicts a significant number of user implementations in the second half of the year, expecting an even distribution of new users in the third and fourth quarters from the existing backlog. This is projected to contribute to a total of 2.8 to 2.9 million net subscriber additions for the full fiscal year 2024.
Barclays anticipates approximately 24% year-over-year growth in Annual Recurring Revenue (ARR) for Alkami in the second quarter. The firm notes that while the second half of the year presents tougher comparisons, potential increases in Average Revenue Per User (ARPU) from add-on sales could balance the impact. This growth expectation is set against a backdrop of increasing ARR, a key metric for the company's sustained financial health.
The analyst also mentioned that EBITDA margin expectations for Alkami might rise, as the company has consistently met or exceeded these margins each quarter since its initial public offering. Given Alkami's progress toward its fiscal year 2026 EBITDA margin goals, Barclays expressed confidence in its previous decision to shift to an Enterprise Value/Free Cash Flow (EV/FCF) valuation approach for the company in the last quarter.
Barclays' outlook for Alkami includes a steady increase in net subscriber additions throughout the second half of the year, driven by a robust backlog. The firm also notes the potential for ARPU expansion through add-on sales, which could support ARR growth despite tougher second-half comparisons.
Additionally, the possibility of upward revisions in EBITDA margin expectations reflects the company's consistent financial performance post-IPO and aligns with Barclays' valuation methodology.
In other recent news, Citi has upgraded its price target for Alkami from $32.00 to $37.00, maintaining a Buy rating, after assessing the company's robust demand environment and growth prospects. Analyst firms Craig-Hallum, Lake Street Capital Markets, and Needham & Company have also increased their price targets, reflecting their positive outlook on Alkami's financial performance.
Alkami has announced a secondary offering of 5 million shares, sold by affiliates of General Atlantic, S3 Ventures, George B. Kaiser, and Brian R. Smith. The company will not receive any proceeds from this sale, which is expected to close on August 12, 2024. J.P. Morgan Securities LLC is managing the offering, with a 30-day option for the underwriter to purchase an additional 750,000 shares.
In other developments, Alkami recently appointed Prerna Sachdeva as the new principal accounting officer, bringing over two decades of experience in global accounting and financial reporting.
These are among the recent developments that highlight Alkami Technology's ongoing operational and financial progress.
InvestingPro Insights
Recent data from InvestingPro offers additional context to Barclays' analysis of Alkami Technology Inc (NASDAQ: ALKT). The company's market capitalization stands at $3.84 billion, reflecting investor confidence in its growth potential. This aligns with Barclays' positive outlook on Alkami's subscriber additions and ARR growth.
InvestingPro data shows that Alkami's revenue growth remains strong, with a 26.69% increase over the last twelve months as of Q2 2024. This robust growth supports Barclays' projection of approximately 24% year-over-year ARR growth in the second quarter.
However, it's worth noting that despite the impressive revenue growth, Alkami is not yet profitable, with an adjusted operating income of -$54.22 million over the last twelve months. This underscores the importance of the company's progress towards its fiscal year 2026 EBITDA margin goals, as mentioned in Barclays' analysis.
InvestingPro Tips highlight that Alkami operates with a moderate level of debt and has liquid assets exceeding short-term obligations, which could provide financial flexibility as the company works towards profitability. Additionally, the stock has shown a strong return over the last year, with a price total return of 112.21%, indicating investor optimism about the company's prospects.
For readers interested in a deeper dive into Alkami's financials and market position, InvestingPro offers 8 additional tips that could provide valuable insights for investment decisions.
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