On Wednesday, UBS revised its price target for PowerSchool Holdings Inc. (NYSE:PWSC), reducing it to $20 from the previous $25, while keeping a Neutral stock rating. The adjustment follows PowerSchool's first-quarter revenue aligning with the upper end of its guidance and its earnings before interest, taxes, depreciation, and amortization (EBITDA) surpassing consensus estimates by approximately 200 basis points. Management has reaffirmed its full-year 2024 revenue guidance and increased its adjusted EBITDA forecast by $1 million.
PowerSchool, which provides education technology solutions, reported that its organic subscription revenue grew by roughly 9% year-over-year in the first quarter. This marks the fifth consecutive quarter where growth has been below 10%. Notably, in the same quarter, PowerSchool closed its biggest cross-sell deal to date, yet the sequential organic net new annual recurring revenue (ARR) remained on par with the figures from the same period last year.
The company's large deal momentum continues, a positive sign according to UBS. However, the firm is looking for more substantial evidence that PowerSchool's key growth drivers, which include multi-product adoption, international expansion, and AI-related product adoption, are making a significant and lasting impact on the company's results and are capable of driving double-digit organic growth.
In light of the recent financial performance and the company's strategic efforts, UBS has reiterated its Neutral position on PowerSchool shares but has adjusted the price target to reflect the current assessment of the stock's potential performance.
InvestingPro Insights
Following UBS's updated assessment of PowerSchool Holdings Inc. (NYSE:PWSC), InvestingPro data and tips provide additional context for investors considering the company's stock. According to InvestingPro, PowerSchool's market capitalization stands at $3.38 billion, with a high price to earnings (P/E) ratio of -86.07, reflecting investor expectations for future earnings growth despite current unprofitability. The company's revenue growth over the last twelve months was 10.62%, with a notable gross profit margin of 68.93%, indicating strong profitability at the cost of goods sold level.
Two critical InvestingPro Tips for PowerSchool include the expectation of net income growth this year and the company's stock currently being in oversold territory according to the Relative Strength Index (RSI). These insights suggest that while the company has faced challenges, with its stock trading near a 52-week low and having fared poorly over the last month, analysts predict a turnaround with profitability anticipated within the year. Investors should note that PowerSchool does not pay dividends, which may influence investment decisions based on income preferences.
For a deeper analysis and more InvestingPro Tips, investors can explore PowerSchool's profile on Investing.com's Pro platform. There are 11 additional InvestingPro Tips available, which can be accessed with an exclusive offer using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.