On Wednesday, Guggenheim maintained its Buy rating on OneStream Inc. (NASDAQ:OS) stock and increased the price target to $35 from $34. This adjustment follows OneStream's strong performance in the second quarter of 2024, which marked the company's first quarter as a publicly traded entity.
OneStream showcased a robust 36% revenue growth and a 31% growth in Annual Recurring Revenue (ARR), alongside its third consecutive quarter of positive Free Cash Flow (FCF).
The company's second-quarter results, which were at the high end of preliminary numbers filed on July 24, demonstrated OneStream's potential in the market. The firm recognized OneStream's ability to navigate the current IT spending environment effectively, attributing their success to early adjustments and skilled operations within this 'new normal'. The Guggenheim analyst highlighted OneStream's multiple streams of opportunity that are expected to coalesce into a comprehensive offering.
The analyst further noted that OneStream is not just a temporary beneficiary of fleeting market conditions but stands to gain from the consolidated solutions it has developed.
This sentiment is supported by customer feedback as indicated in the proprietary survey "OS: EPM Survey Supports More Hyper Growth to Come" dated August 26. The survey suggests a positive outlook for OneStream's growth trajectory.
OneStream's management expressed optimism about the latter half of the year, citing factors such as their consolidated platform that eases the workload of finance executives, an incremental AI solution that 40% of users are anticipated to adopt within the next year, and the upcoming end-of-life of a legacy product from a competing market leader.
Additionally, a significant greenfield opportunity exists in the form of numerous Excel-based solutions that are currently in use. These elements contribute to the firm's decision to reiterate the Buy rating and elevate the price target for OneStream.
In other recent news, OneStream Inc. has been the subject of increased attention from multiple financial firms following its robust second-quarter results. Needham and BofA Securities raised their price targets on OneStream to $35 and $36 respectively, maintaining their Buy ratings.
The firms' adjustments came after OneStream's Q2 results met the higher end of expected range, with a forecasted third-quarter subscription revenue growth of 35%, surpassing the anticipated 30%.
The company's Remaining Performance Obligations (RPO) also saw a year-over-year increase of 41%, reinforcing the perspective of strong market demand. OneStream's management team provided positive insights on the demand for the company's core solutions, with an emphasis on the growing influence of artificial intelligence in their offerings. This focus on AI is expected to subtly boost the company's revenue growth into fiscal year 2025.
Truist Securities maintained a Buy rating and a $35.00 price target, emphasizing OneStream's alignment with previous estimates and the importance of the company's upcoming third-quarter and full-year forecasts. Similarly, Scotiabank initiated coverage with a Sector Outperform rating and a $34 price target, highlighting OneStream's transformative role in unifying enterprise systems.
Lastly, Needham assigned a Buy rating to OneStream, with a $33 price target, praising the company's integration of machine learning and artificial intelligence technologies into its platform. These recent developments highlight a positive outlook for OneStream, with various firms expressing confidence in the company's growth trajectory and market position.
InvestingPro Insights
As OneStream Inc. (NASDAQ:OS) captures the attention of analysts and investors alike, the latest data from InvestingPro provides a more nuanced picture of the company's financial health and market performance. With a substantial market capitalization of $7.1 billion, OneStream is a sizable player, yet it's important to note that the company is not expected to be profitable this year, which aligns with a negative P/E ratio of -212.64. This is reflected in the company's recent performance over the last twelve months as of Q1 2024, where it was not profitable.
Despite the lack of profitability, OneStream's revenue growth is impressive, boasting a 39.93% increase in the first quarter of 2024. This robust growth is a testament to the company's ability to expand its market share and could be indicative of future potential. However, investors should consider that the stock is trading at a high revenue valuation multiple and near its 52-week high, with the price at 96.43% of this peak. This suggests that the stock's current valuation is optimistic, expecting continued growth and market expansion.
For those considering an investment in OneStream, it's worth noting that the company does not pay a dividend, which may be a factor for income-focused investors. The InvestingPro platform offers additional insights, with 7 more InvestingPro Tips available that could help investors make a more informed decision. To explore these further, visit https://www.investing.com/pro/OS.
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