On Monday, Oppenheimer has adjusted the price target for Bill.com Holdings Inc. (NYSE: NYSE:BILL), decreasing it to $70 from the previous target of $95, while maintaining an Outperform rating on the company's stock.
This change reflects growing concerns over the company's take rate uncertainty, its exposure to small and medium-sized businesses (SMBs), and noise surrounding Bank of America (NYSE:BAC).
The current sentiment among investors is cautious due to the uncertain floor of the company's valuation, which has caused interested parties to remain on the sidelines despite the company's valuation currently being at 17 times its projected calendar year 2025 free cash flow (FCF). There is interest from new investors at these levels, but the lack of a clear valuation bottom is a deterrent.
Despite the concerns, there are positive indicators. The company has seen a slight uptick in SMB spending each month in the second quarter, as detailed in Exhibit 8, suggesting a favorable trend for total payment volume (TPV). Additionally, investors are anticipating the company's initial FY25 growth outlook to be in the low double-digit range, with expectations for EBIT and EPS outlooks that align with current projections.
A standout metric for Bill.com has been its website traffic, which leads its peer group. The traffic to Bill.com's website has grown by 20% year-over-year, outperforming the average of its peers, which saw a 4% decline. Moreover, the growth in website traffic has accelerated by 12 percentage points quarter-over-quarter.
The revision of the price target to $70 is a reflection of a lower multiple being assigned to non-recurring revenue, indicating a more conservative valuation approach by Oppenheimer amidst the current market uncertainties affecting Bill.com.
In other recent news, Bill.com Holdings Inc. has been the focus of several financial developments. Baird has adjusted its outlook on the company, raising the price target to $68 from the previous $60, and expects Bill.com to surpass Wall Street's Q4 revenue and EBITDA expectations.
The firm also anticipates a mild upside leading into the earnings report. Concurrently, Bill.com has appointed Sarah Acton as Chief Customer Officer, a strategic move expected to enhance the company's engagement with small and midsize businesses.
Needham, on the other hand, has reaffirmed its Buy rating on Bill.com, expressing confidence in the company's growth prospects and potential benefits from its new embedded strategy. The firm maintains a steadfast shares target of $100.00.
In contrast, Baird revised its price target for Bill.com downward to $60 following the company's announcement of a significant repurchase of its convertible notes.
Bill.com has initiated a repurchase of approximately $235 million worth of its convertible notes due in 2025, reducing the remaining notes set to mature in December 2025 to $172 million. This move is part of the company's broader buyback plan and is seen as a positive step for the company's asset management.
InvestingPro Insights
As investors weigh Oppenheimer's revised price target for Bill.com (NYSE: BILL), it's pertinent to consider the company's financial health and market performance. InvestingPro data shows a market capitalization of $5.58 billion, underscoring the company's significant presence in the financial technology sector. Despite not currently paying dividends, Bill.com's gross profit margin is impressive at 85.76% for the last twelve months as of Q3 2024, indicating strong profitability on the services it provides.
InvestingPro Tips highlight that management's confidence is reflected in aggressive share buybacks, and the company's financial stability is evident by holding more cash than debt on its balance sheet. Additionally, analysts are optimistic about the company's future, predicting net income growth this year.
For readers who find these insights valuable, InvestingPro offers additional tips for Bill.com, with a total of 11 detailed tips available that could further inform investment decisions. To access these insights and optimize your investment strategies, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
The recent volatility in Bill.com's stock price, with a 1-month total return of 11.11% but a 6-month total return of -28.63%, may present both challenges and opportunities for investors. The company's fair value is estimated at $68.0 by InvestingPro, offering a potential upside from the previous close price of $53.61. As the next earnings date approaches on August 15, 2024, investors will be keenly observing for signs of sustained growth and profitability that could redefine the company's valuation floor.
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