On Thursday, Stephens upgraded PAR Technology (NYSE:PAR) stock from Equal Weight to Overweight and increased its price target to $60 from the previous $46. The firm highlighted PAR's position as a leading company in the restaurant technology sector, emphasizing its potential to benefit from the growing demand for loyalty programs, cloud-native point of sale (POS), and data analytics solutions.
The upgrade reflects Stephens' confidence in PAR Technology's trajectory toward achieving a positive adjusted EBITDA by the third quarter and its prospects for mid-20% or higher margins in the medium to long term. These factors are seen as drivers for an expansion of the company's valuation multiples.
Stephens noted the company's discounted valuation, attributing it to PAR's current lack of profitability. However, the firm anticipates that the company's progress toward its financial targets will act as a catalyst for the stock's valuation to rise.
The recent sale of government operations by PAR Technology is viewed as a strategic move that simplifies the company's business narrative and provides additional capital flexibility. Additionally, the acquisitions of Stuzo and Task are expected to pave the way for growth in the convenience store sector and international market expansion, further bolstering the company's growth prospects.
In other recent news, PAR Technology has made significant strategic moves that have drawn the attention of both Needham and Benchmark.
Following the announcement of PAR Technology's decision to sell its Government operating segment to Booz Allen (NYSE:BAH) Hamilton and NexTech Solutions Holdings for $102 million, Needham revised its price target for the company from $53 to $57 while maintaining a Buy rating. This sale, which accounted for roughly 33% of PAR's total revenue in FY23, is expected to simplify the company's business structure and potentially lead to a higher market valuation.
In addition to Needham's optimistic outlook, Benchmark also increased its price target for PAR Technology from $59 to $61, citing the company's strategic direction towards a profitable software platform aimed at enterprise restaurants. This revised price target anticipates substantial financial benefits from the company's focus on building a fast-growing, profitable software platform.
On the earnings front, PAR Technology reported a 25% growth in annual recurring revenue (ARR) and a 5% year-over-year increase in total revenues for the quarter at $105.5 million.
The company also completed a merger and acquisition transaction, acquiring Stuzo to enhance its technology offerings for convenience stores. Despite a decline in hardware sales, PAR Technology plans to become EBITDA-positive by the third quarter of 2024.
These developments underscore PAR Technology's commitment to streamlining its operations and focusing on its core restaurant-tech business. These strategic moves have been positively received by Needham and Benchmark, with both firms expressing confidence in the company's future prospects.
InvestingPro Insights
Following Stephens' optimistic upgrade of PAR Technology (NYSE:PAR), a glimpse at the real-time data from InvestingPro reveals a mixed financial landscape for the company. With a market capitalization of $1.54 billion and a negative P/E ratio of -18.01, reflecting the analysts' consensus that PAR will not be profitable this year, the company's stock price movements have been quite volatile. Despite this, PAR's liquid assets have been sufficient to cover its short-term obligations, which could be a sign of financial resilience.
InvestingPro data also shows that PAR has experienced an 11.95% revenue growth over the last twelve months as of Q1 2024, with a gross profit margin of 24.63%. Although the company is not currently profitable, with an operating income margin of -17.82%, it has managed to deliver a high return over the last decade. Notably, PAR does not pay a dividend, which may be relevant for income-focused investors. Additionally, the stock is trading at 90.76% of its 52-week high, with a closing price of $45.38.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available, which could provide further insights into PAR Technology's performance and potential. Interested readers can take advantage of a special offer 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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