Roth/MKM has made an adjustment to the financial outlook for Yext Inc . (NYSE: NYSE:YEXT), a tech company specializing in online brand management.
The firm reduced its price target on the company's shares to $7.50 from the previous target of $8.00 but opted to maintain a Buy rating on the stock.
The adjustment follows Yext's second-quarter earnings report, which indicated a softer-than-expected top-line performance, although the company did report a significant upside to its second-quarter EBITDA (earnings before interest, taxes, depreciation, and amortization).
A noteworthy development in the report was the increase in Direct Annual Recurring Revenue (ARR) quarter-over-quarter, marking the first rise in this metric in a year. Management attributed this growth to new client acquisitions over the last three months.
Yext's management has reiterated their confidence in the company's ability to accelerate ARR and expand EBITDA margins as they move into calendar year 2025. They are projecting that by the end of fiscal year 2025, which aligns with calendar year 2024, Yext could achieve a $100 million EBITDA run rate and a free cash flow (FCF) run rate exceeding $90 million.
In other recent news, Yext is shifting to usage-based pricing on the third-party reseller side in response to market dynamics. This move is aimed at increasing customer flexibility even though it may dampen reported ARR. Despite a $2 million drop in committed ARR for the reseller business, revenue remained flat.
InvestingPro Insights
In light of the recent financial outlook adjustment by Roth/MKM for Yext Inc. (NYSE: YEXT), an examination of real-time data and InvestingPro Tips provides further context for investors. The company's market capitalization stands at $620.6 million, and despite a negative P/E ratio of -101.67, reflecting its current lack of profitability, Yext holds more cash than debt on its balance sheet, which is a positive sign for its financial health. Additionally, the gross profit margin for the last twelve months as of Q1 2025 is an impressive 78.13%, highlighting the company's ability to maintain profitability at the operational level.
Among the InvestingPro Tips, two noteworthy points are that management has been aggressively buying back shares, signaling confidence in the company's future, and analysts predict that Yext will become profitable this year. This aligns with management's own projections of accelerating ARR and expanding EBITDA margins. However, it is also important to note that four analysts have revised their earnings downwards for the upcoming period, which may warrant caution. For those interested in deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/YEXT.
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