On Thursday, Citi adjusted its price target on shares of Appian Corp . (NASDAQ: NASDAQ:APPN), reducing it to $40.00 from the previous $42.00, while continuing to endorse the stock with a Buy rating. The adjustment comes after Appian reported a stronger-than-expected performance for the second quarter, driven by license revenue, but also revised its future outlook, factoring in potential go-to-market disruptions following a recent reduction in force that saw a 7% cut in its workforce.
The company's forecast for the cloud segment's growth rate at the end of the fourth quarter of 2024, projecting a 13% year-over-year increase, has raised some concerns among investors. However, Citi views this estimate as overly cautious, noting Appian's strong net revenue retention rates of 118%, with a lower boundary of 113%. This conservative stance, according to Citi, could lead to a series of higher-than-expected financial performances in the future.
Citi expressed optimism regarding Appian's improved EBITDA and the acceleration of profitability, which is now expected earlier than the previously anticipated 2025. The firm's reassurance about the company's prospects is reflected in the continued Buy rating, despite the slight downward adjustment in the price target. Appian's valuation is pegged at 3.4 times its calendar year 2025 enterprise value to revenue ratio, with the new target price based on 5 times subscription revenue and 2 times service revenue.
In other recent news, Appian Corp reported a year-over-year increase of 24% in its cloud subscription revenue to $86.6 million in the first quarter of 2024, despite an adjusted EBITDA loss of $1.3 million. The total revenue rose by 11% to $149.8 million. Citi maintained a Buy rating on Appian shares, despite a slight reduction in the price target to $40, following a stronger-than-expected second-quarter performance. However, DA Davidson downgraded Appian to a Neutral rating and reduced the price target to $33 due to a legal setback for the company. TD Cowen also adjusted its stance on Appian, reducing the price target to $36 while maintaining a Hold rating. KeyBanc maintained an Overweight rating but lowered the price target to $37. These recent developments reflect analysts' varied perspectives on Appian's financial performance and future prospects.
InvestingPro Insights
Appian Corporation's (NASDAQ: APPN) recent performance and Citi's adjusted price target have drawn investor attention. In light of this, key metrics and insights from InvestingPro provide a deeper understanding of the company's financial health and market position. Appian's market capitalization stands at $2.13 billion, reflecting its size and significance in the market. Despite a challenging year with no profitability over the last twelve months, Appian has shown resilience with a robust gross profit margin of 74.1% as of Q1 2024. This indicates a strong ability to control costs relative to revenue, which is crucial for long-term sustainability.
InvestingPro Tips highlight that Appian's stock may be in overbought territory and analysts are not expecting the company to be profitable this year. Additionally, the company operates with a moderate level of debt and does not pay dividends, focusing instead on reinvesting in growth. Notably, Appian has experienced a strong return over the last month, with a 20.09% increase in its price total return, showcasing a recent surge in investor confidence.
For those seeking more detailed analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/APPN. These insights could be valuable for investors who are considering Appian's stock in light of recent developments and Citi's outlook.
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