On Monday, Citi initiated coverage of OneStream Inc. (NASDAQ: OS) with a neutral rating and a price target of $34.00. The firm acknowledged OneStream as a prominent player in the CFO's office platform space, with a strong foundation in financial consolidation and an expanding role in artificial intelligence.
OneStream's platform operates within the $7 billion Enterprise Performance Management (EPM) market, where it has been leveraging its data capabilities to capture various use cases. This strategy has resulted in an impressive Net Revenue Retention (NRR) rate of 118%.
Citi's stance is influenced by the stock's significant appreciation, with a 45% return since its initial public offering (IPO). The company's current enterprise value to revenue (EV/rev) multiple is positioned in the 92nd percentile, suggesting a high valuation compared to peers.
The neutral rating reflects a balanced view of risk and reward for OneStream's stock, despite the firm's conservative estimates. Citi suggests that while there are many positive aspects to OneStream's business, the current stock price adequately reflects its prospects.
The investment firm indicated a willingness to become more bullish on the stock in the event of a price pullback, citing a "compelling repeat founder story, large replacement opportunity, and ramping AI initiatives" as key factors that could drive future growth.
In other recent news, OneStream Inc. has been in the spotlight as prominent financial firms BTIG and Baird initiated coverage on the company. BTIG bestowed a Buy rating on OneStream shares, setting a price target of $37.00, while Baird rated the stock as 'Outperform' with a $32.00 price target. These developments highlight OneStream's position as a leading growth entity, particularly within the Office of the CFO software market.
BTIG highlighted OneStream's platform for its visibility, functionality, and extensibility in financial analysis, planning, and performance management. The firm anticipates that OneStream will continue to exhibit industry-leading growth and improvements in margins, projecting the company to achieve over 20% in free cash flow margins in the coming years. New product introductions, including advancements in embedded artificial intelligence and automation features on the OneStream platform, are expected to bolster this growth.
Simultaneously, Baird recognized OneStream for its experienced management team and its potential in platform expansion. The firm also acknowledged the company's early successes in penetrating markets beyond its existing base as a positive indicator of its growth trajectory.
InvestingPro Insights
As investors weigh Citi's neutral stance on OneStream Inc. (NASDAQ: OS), real-time data from InvestingPro provides additional context to the company's financial health and market performance. OneStream's market capitalization stands at $6.62 billion, underscoring its significant presence in the EPM market. Despite being a key player in its field, the company is not profitable over the last twelve months, as evidenced by a negative P/E ratio of -212.64. This aligns with Citi's implication of high valuation, further supported by OneStream trading at a high revenue valuation multiple.
OneStream has demonstrated robust revenue growth, with a quarterly increase of 39.93% as of Q1 2024, reflecting its successful expansion strategies. However, the company's gross profit margin of 69.79% indicates its ability to retain a substantial portion of its revenue after the cost of goods sold. According to InvestingPro Tips, OneStream's stock generally trades with low price volatility, which might appeal to investors looking for stable equity performance. Additionally, the stock is trading near its 52-week high, currently at 96.93% of this peak.
For those interested in delving deeper into OneStream's financials and market prospects, there are numerous additional InvestingPro Tips available at https://www.investing.com/pro/OS. These insights could provide investors with a more comprehensive understanding of the company's position and potential investment opportunities.
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