On Thursday, BMO Capital Markets updated its outlook on shares of AvidXChange Holdings (NASDAQ: AVDX), increasing the price target to $11 from the previous $10, while retaining a Market Perform rating on the stock.
The firm's analyst cited a more positive view following the company's third-quarter performance, noting that despite expected ongoing macroeconomic pressures, AvidXChange has shown encouraging signs of improved transaction retention among its customer base.
The analyst highlighted that AvidXChange's third-quarter core revenue growth exceeded expectations and that the company provided solid guidance for the fourth quarter, with an anticipated year-over-year growth of around 10%. This performance, according to the analyst, is a testament to AvidXChange's ability to leverage its gross margin and operating expenses effectively.
AvidXChange's demonstration of gross margin and operational expenditure leverage was particularly noteworthy, as it suggests the company is managing its costs efficiently while still expanding its revenue base. This operational efficiency has led BMO Capital Markets to adjust its adjusted EBITDA estimates upwards by 11% for 2025 and 4% for 2026.
The analyst believes that the current EBITDA margin estimates for AvidXChange may be conservative, projecting a potential 25% EBITDA margin by 2026. This adjustment in financial projections and the consequent increase in the price target reflects the analyst's expectation that AvidXChange's financial health will continue to strengthen in the medium term.
In other recent news, AvidXChange Holdings reported a robust Q3 performance, marking a 14% year-over-year revenue increase to $113 million and improved gross margins to 74.5%. The firm also initiated a $100 million share repurchase program.
Piper Sandler and JPMorgan both maintained a Neutral rating on AvidXChange, raising the price target to $10 from the previous $9. These analyst adjustments followed the company's strong Q3 results, which indicated positive signs of business stabilization.
AvidXChange's recent developments also include strategic partnerships and market expansion, particularly in the healthcare sector and with regional banks. The company's 2024 revenue forecast is between $437 million and $439 million, with an adjusted EBITDA projection of $78 million to $79 million.
Despite potential challenges from political uncertainty and interest rate changes, AvidXChange targets 50% to 55% growth for 2025. These recent developments provide investors with an understanding of the company's financial performance and future expectations.
InvestingPro Insights
Building on BMO Capital Markets' positive outlook for AvidXChange Holdings (NASDAQ: AVDX), recent data from InvestingPro provides additional context to the company's financial performance and market position.
AvidXChange's market capitalization stands at $1.99 billion, reflecting its significant presence in the financial technology sector. The company's revenue growth of 17.84% over the last twelve months aligns with the analyst's observations of strong performance, particularly the 14.28% quarterly revenue growth in Q3 2024. This growth trajectory supports BMO's decision to raise the price target.
InvestingPro Tips highlight that net income is expected to grow this year, and analysts predict the company will be profitable. These projections corroborate BMO's optimistic view on AvidXChange's future financial health and potential for margin expansion.
The company's strong recent performance is evident in its stock price movements, with InvestingPro data showing a 26.37% return over the last month and a 27.87% return over the last three months. This upward trend aligns with the analyst's more positive outlook following the Q3 results.
It's worth noting that InvestingPro offers 7 additional tips for AVDX, providing investors with a more comprehensive analysis of the company's prospects.
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