On Friday, TD Cowen announced a revision in the price target for Rimini Street (NASDAQ:RMNI), decreasing it to $3.00 from the previous $3.50. The firm has decided to maintain a Hold rating on the company's shares. This adjustment follows Rimini Street's recent financial performance which showed a revenue growth of 1.2%, falling short of TD Cowen's estimate of 2.6%. Moreover, the company experienced a significant decline in billings growth, reporting a 20% decrease against the anticipated 3% increase.
The management of Rimini Street attributed the disappointing results to delays in deal closures within the first quarter. According to the firm, sales representatives were sidetracked by new selling strategies, which took their focus away from finalizing higher Average Selling Price (ASP) core deals. To address this issue, the company has restructured its compensation plans to realign sales efforts towards closing these crucial deals.
Additionally, the ongoing litigation related to Rimini Street II has contributed to the uncertainty surrounding the company's financial outlook. As a result, the guidance remains suspended. The firm's statement highlighted the impact of the legal proceedings, "RMNI II litigation still pending; thus guidance is still suspended."
In summary, while Rimini Street has taken steps to improve its sales focus, the lingering litigation and underperformance in the first quarter have led TD Cowen to lower the price target. Despite these challenges, the firm continues to hold a neutral stance on the stock with the updated price target of $3.00.
InvestingPro Insights
In light of TD Cowen's revised price target for Rimini Street (NASDAQ:RMNI), current data from InvestingPro provides additional context for investors. Rimini Street is trading at a low revenue valuation multiple, with a P/E Ratio (Adjusted) for the last twelve months as of Q1 2024 sitting at 7.66, suggesting that the stock may be undervalued relative to earnings. Additionally, the company holds more cash than debt on its balance sheet, which may offer some financial stability despite the recent underperformance in revenue growth and billings.
However, it's important to note that Rimini Street's short-term obligations exceed its liquid assets, which could raise concerns about the company's ability to meet its immediate financial obligations. Furthermore, with a recent downturn in stock performance, as indicated by a one-month price total return of -17.41%, investors may exercise caution. On a more positive note, analysts predict the company will be profitable this year, and it has been profitable over the last twelve months.
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