On Wednesday, Citi reaffirmed its positive stance on Alight Solutions (NYSE:ALIT) shares, maintaining a Buy rating with an $11.00 price target. The endorsement follows Alight's third-quarter 2024 performance, which saw a slight revenue increase, attributed to improved BPaaS growth and project revenue.
The company's recent divestiture and recapitalization of Sparta, along with the completion of its cloud migration, have been highlighted as positive developments. Alight also reported an 8%-9% sequential expansion in contracted revenue and strengthened relationships with several prominent clients.
The analyst noted that after a period of transition and the achievement of cleaner financials, the outlook for the fiscal year 2025 appears promising. This optimism is underpinned by a robust pipeline and on-track cost-saving measures.
Additional efficiencies are being explored by domain consultants, and there is potential for increased project work with the new administration. The new management's efforts to revitalize Alight's market approach were also commended.
Despite acknowledging that there is more work ahead, the analyst expressed confidence in Alight's progress towards its mid-term goals. This progress is deemed supportive of the stock achieving a low double-digit EBITDA multiple. The Buy rating on Alight Solutions by Citi reflects a belief in the company's continued momentum and potential for future growth.
In other recent news, Alight Solutions reported stable third-quarter results, outperforming Wall Street's revenue and EBITDA expectations. The firm's revenue saw a minor year-over-year decline of 0.5% to $555 million, while recurring revenue now constitutes 91% of total revenue. The financial analyst firm, Needham, responded to these results by raising its price target for Alight Solutions shares to $11, up from $9, maintaining its Buy rating on the stock.
In addition to these developments, Alight Solutions provided fourth-quarter guidance that aligns with consensus estimates. The company also announced a new quarterly dividend of $0.04 per share, approved by its Board, reflecting its commitment to enhancing capital returns to shareholders. This strategic move is seen as a means to maximize shareholder value.
Alight Solutions also reported a positive shift in its business model with an increased focus on recurring revenue. The company expects its annual recurring revenue bookings to grow by double digits in the latter half of the year.
Client acquisitions in the third quarter, including Hewlett Packard Enterprise (NYSE:HPE), Nokia (HE:NOKIA), and Siemens (ETR:SIEGn), and a 60% increase in the sales pipeline, indicate potential growth and deeper client engagement. The company's upcoming Investor Day in Q1 2025 is expected to provide more insights into its long-term strategy and operational plans.
InvestingPro Insights
Alight Solutions' (NYSE:ALIT) recent performance and strategic moves align with several key insights from InvestingPro. The company's revenue growth of 15.71% over the last twelve months supports Citi's positive outlook on Alight's financial trajectory. This growth, coupled with an EBITDA increase of 18.73% over the same period, underscores the company's improving operational efficiency, which is crucial as it moves towards its mid-term goals.
InvestingPro Tips highlight that management has been aggressively buying back shares, indicating confidence in the company's future prospects. This aligns with Citi's positive stance on Alight's outlook for fiscal year 2025. Moreover, the expectation that net income will grow this year supports the analyst's optimism about the company's financial health.
It's worth noting that Alight's stock has shown significant momentum, with a 22.08% price return over the last three months. This performance may reflect investor confidence in the company's strategic direction and recent operational improvements mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Alight Solutions, providing a deeper understanding of the company's financial position and market performance.
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