On Tuesday, Roth/MKM sustained its Buy rating on YEXT Inc. (NYSE:YEXT) stock, with a steady price target of $8.00. The firm acknowledged Yext (NYSE:YEXT)'s recent earnings report as a mix of challenges and successes, noting that while revenue softness persisted, the company achieved a significant EBITDA increase. This boost was attributed to staff reductions and improved operational efficiency.
The company is on track to reach a $100 million EBITDA run rate and more than $90 million in free cash flow (FCF) run rate by the end of fiscal year 2025, which corresponds to calendar year 2024.
Management at Yext has reaffirmed their confidence in accelerating annual recurring revenue (ARR), expecting mid-single-digit percentage growth by the fourth quarter and high-single-digit percentage growth in the first half of the following year.
Despite the mixed results in the earnings report, Roth/MKM remains optimistic about Yext's future performance. The firm's stance is particularly geared towards investors with patient capital who are looking for software-as-a-service (SaaS) investment opportunities at what is perceived to be a low valuation point.
Yext's ability to surpass EBITDA expectations amidst revenue challenges suggests a strong focus on cost management and operational efficiencies. The company's management team has expressed a clear strategy for growth and profitability, which appears to align with Roth/MKM's positive outlook on the stock.
Investors may find the reiteration of the Buy rating and the maintained price target as an indication of the firm's belief in Yext's potential for recovery and growth. The company's anticipated progress in ARR and FCF could present an opportunity for those seeking to invest in the technology sector, particularly in SaaS platforms.
In other recent news, Yext has reported its first quarter fiscal 2025 results, which include the acquisition of Hearsay Systems for $125 million. This acquisition, which has an additional $95 million in potential contingent consideration, is expected to enhance Yext's standing in the financial services sector, given Hearsay's $60 million revenue and free cash flow breakeven status. Despite challenges in demand conversion and budget constraints, Yext anticipates high single-digit annual recurring revenue (ARR) growth by the first half of 2025.
This recent development follows Yext's strategic decision to boost its offerings in the financial services industry, especially in wealth management and agent-based businesses.
The company has adjusted its full-year revenue guidance due to the aforementioned conversion challenges and budget limitations. However, Yext remains focused on long-term customer relationships and growth opportunities, expecting mid-single-digit growth by year-end.
Yext acknowledges large customer churn as a challenge and experienced a sequential dip in direct and third-party ARR due to budgetary pressures and renewal cycles.
However, the company is optimistic about its ARR growth in the second half of the year, based on visibility into demand and proactive engagement with renewals. Details about Hearsay's integration, including employees and functions, were not provided, but synergies are expected.
InvestingPro Insights
Yext Inc . (NYSE:YEXT) has been navigating a complex business environment, as reflected in the recent earnings report. To provide a more comprehensive view of the company's financial health and market position, here are some key insights based on real-time data from InvestingPro. The company's current market capitalization stands at $634.98 million, a figure that investors use to gauge the company's relative size in the market. Despite a challenging year with the stock price down over 60%, Yext's management has been actively buying back shares, a sign that may be interpreted as confidence in the company's future.
On the balance sheet, Yext holds more cash than debt, a prudent financial position that can offer resilience in uncertain times. Additionally, the company boasts impressive gross profit margins of 78.37% over the last twelve months as of Q4 2023, emphasizing its ability to maintain profitability on its core services. While the company has not been profitable over the last twelve months, analysts predict that Yext will turn a profit this year, which could be a pivotal point for investor sentiment.
For those considering a deeper dive into Yext's potential, there are 6 additional InvestingPro Tips available at https://www.investing.com/pro/YEXT. These tips provide further analysis that could help in making a more informed investment decision. Moreover, investors can take advantage of a special offer by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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