On Thursday, Evercore ISI adjusted its outlook on Verint Systems (NASDAQ:VRNT) stock, reducing the price target to $30 from $34, while maintaining an In Line rating. The adjustment comes after Verint reported mixed results for the second quarter, missing both top and bottom line consensus estimates slightly.
This was partly attributed to a $1.5 million deal delay which, if included, would have aligned the reported Key Performance Indicators (KPIs) with expectations.
Management at Verint has reiterated their fiscal year 2025 revenue guidance at approximately $933 million, indicating around a 5% year-over-year growth at the midpoint, and an Earnings Per Share (EPS) of $2.90. The company anticipates the second half of the fiscal year to mirror the previous year's pattern, with the fourth quarter expected to be a strong period for renewals.
Despite the recent results and negative sentiment from other Unified Communications (UC) vendors, Verint's management remains confident in achieving their year-end targets, which is why the guidance was reiterated rather than reduced.
The report highlighted a 10.7% year-over-year increase in Total Software as a Service (SaaS) Annual Recurring Revenue (ARR), with net new ARR rising by 113% to $18.8 million. A notable positive from the earnings call was the 20% year-over-year increase in contract durations and consistent renewal rates.
However, the mix shift in deals between bundled and unbundled SaaS offerings has introduced some variability into revenue recognition, with new bundled SaaS Annual Contract Value (ACV) bookings down by 29% year-over-year, while unbundled SaaS was up by 14%.
Verint has also updated its strategy to allow legacy and unbundled SaaS customers to deploy AI bots, a capability previously exclusive to bundled SaaS customers. This change could potentially delay conversions and slightly impact gross margins. Despite these developments, Evercore ISI views Verint as a compelling value proposition for investors interested in a derivative contact center play.
However, the stock is expected to remain within a narrow trading range until consistent execution is demonstrated. With the stock now trading at approximately 2 times sales on calendar year 2025 numbers, the valuation seems reasonable, but the firm does not foresee an immediate catalyst that would alter the current market narrative.
In other recent news, Verint Systems Inc. reported its second-quarter results, which fell short of analyst estimates on both the top and bottom lines. The company posted adjusted earnings per share of $0.49, which was less than the $0.53 expected by analysts.
Revenue was reported at $210.17 million, which was below the consensus estimate of $212.81 million. Despite these figures, Verint highlighted strong momentum in its artificial intelligence (AI) business with AI bookings increasing over 40% year-over-year.
The company's bundled SaaS revenue growth also accelerated to 15% compared to the prior year period, largely driven by AI adoption. CEO Dan Bodner expressed confidence in the company's AI capabilities and their potential for future growth.
For the full fiscal year 2025, Verint reaffirmed its outlook, expecting revenue of $933 million, plus or minus 2%, and adjusted earnings per share of $2.90 at the midpoint of its revenue guidance. These recent developments provide a snapshot of the company's current financial status and future expectations.
InvestingPro Insights
As Verint Systems (NASDAQ:VRNT) navigates through its fiscal challenges, the latest data from InvestingPro provides a nuanced picture of the company's current financial standing. With a market capitalization of $1.84 billion and a high earnings multiple, reflected in a P/E ratio of 62.77, Verint is trading at a premium compared to some industry peers. Despite the recent price target adjustment by Evercore ISI, Verint has been showing signs of strength with a gross profit margin of nearly 71% over the last twelve months as of Q1 2025, underscoring the company's ability to maintain profitability amid shifting market dynamics.
InvestingPro Tips highlight that the management's aggressive share buyback program and a high shareholder yield are strategic moves that may resonate with investors looking for companies actively managing their capital. Additionally, the expectation of net income growth this year, combined with analysts' predictions of profitability, provides a positive outlook for Verint's financial performance. With 6 additional tips available on InvestingPro, interested investors can delve deeper into the company's prospects. However, it's noteworthy that Verint does not pay a dividend, which could influence investment decisions for those seeking regular income streams.
Given the company's strategic updates and the financial data at hand, Verint presents itself as a noteworthy consideration for investors who are comfortable with its valuation and are looking for growth potential in the technology sector. The InvestingPro Fair Value estimate of $42.98 suggests a potential upside from the current trading price, indicating that the market may not have fully recognized the company's intrinsic value.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.