On Friday, Citi maintained a Neutral stance on Jack Henry & Associates (NASDAQ:JKHY), a leading provider of technology solutions and payment processing services primarily for the financial services industry, with a price target of $180.00.
The affirmation of the rating followed Jack Henry's 2024 Investor Day, which aligned with market expectations and showcased the company's ongoing product and technology modernization efforts.
During the event, Jack Henry's management reiterated their medium-term expectations, expressing confidence in the company's ability to drive revenue growth towards the higher end of their projected range, or potentially beyond, as product initiatives reach fruition. The company's emphasis on product portfolio optimization was also highlighted as a means to improve cost structures and simplify organizational processes.
The financial technology firm's dedication to investing in forward-looking products was noted as a potential differentiator in the market. This includes the integration of generative AI within its 'Conversations' product feature, which is expected to enhance the company's competitive edge in digital banking.
Furthermore, Jack Henry's focus on business banking was recognized as a strategic move to support growth in the small and medium-sized business (SMB) sector, including Treasury Management solutions for larger businesses. This approach is anticipated to strengthen the company's position in the digital banking space.
While acknowledging the positive long-term outlook for Jack Henry, Citi pointed out that a more appealing entry point or a catalyst for re-rating the company's multiple might be preferable for investors. As fiscal year 2025 progresses, investors are also likely to watch for the expected acceleration in revenue growth.
In other recent news, Jack Henry & Associates showcased robust fiscal results for 2024, reporting record revenue of $2.2 billion and an operating income of $489.4 million. The company also recorded a significant increase in sales bookings, with notable contract wins with large financial institutions.
Compass Point initiated a Neutral rating on shares of Jack Henry & Associates and set a 12-month price target of $186.00. The firm projected fiscal year 2025 and 2026 adjusted revenue for Jack Henry at $2.35 billion and $2.53 billion, respectively, and GAAP earnings per share at $5.80 and $6.30.
Additionally, the company reported 22 competitive core wins for the final quarter and 57 for the year, and demand for digital products resulted in 45 new clients for Banno Retail and 50 for Banno Business in the last quarter. Jack Henry's fully diluted earnings per share for fiscal '24 increased by 4% to $5.23, with an expected GAAP EPS of $5.78 to $5.87 per share for fiscal '25. However, the cost of revenue has increased by 6% for the quarter and 7% for the year, along with an increase in R&D expenses and SG&A expenses.
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