On Friday, AvidXchange Holdings (NASDAQ:AVDX) received a significant stock rating upgrade from Compass Point. The firm shifted its stance on the shares from Neutral to Buy, simultaneously raising the price target to $15.00, up from the previous $8.00. This adjustment represents a potential 55% upside from the stock's recent performance.
The company, currently valued at $2.31 billion, has demonstrated strong momentum with impressive revenue growth of 17.84% over the last twelve months. According to InvestingPro data, four analysts have recently revised their earnings estimates upward for the upcoming period.
The decision to upgrade AVDX is based on a revenue multiple approach, applying a 5.5x multiple to the company's short-term model (STM) revenue projection of $556 million. This method underpins the new $15 price target.
Moreover, Compass Point has introduced its fiscal year-end 2026 revenue estimate for AvidXChange at $578 million, claiming to be the highest among its peers on Wall Street for that year's projection.
The company maintains a robust gross profit margin of 71.46%, supporting its growth trajectory. Get deeper insights into AVDX's financial health and access exclusive analysis with InvestingPro, which offers additional ProTips and comprehensive metrics.
The analyst's optimism is partly due to the net transaction retention rate, which is believed to have reached its lowest point in the third quarter of 2024. Expectations are set for a rebound towards AvidXChange's historical run-rate of 105%. This anticipated recovery is linked to rising CEO confidence, which is expected to strengthen following the clarity provided by the recent U.S. presidential race.
Compass Point foresees a cyclical increase in the year-over-year growth of accounts payable (AP), which is another factor contributing to the positive outlook on AvidXChange's future performance. The firm's analysis suggests that the company is positioned for an upward trajectory in the coming period.
In other recent news, AvidXChange Holdings reported a 14% year-over-year revenue increase in the third quarter, reaching $113 million, and improved gross margins to 74.5%. The company also initiated a $100 million share repurchase program. BMO Capital Markets, Piper Sandler, and JPMorgan all maintained a neutral rating on AvidXChange, with each firm raising the price target following the company's strong Q3 results.
Analysts from these firms highlighted AvidXChange's ability to leverage its gross margin and operating expenses effectively, citing this as a testament to the company's operational efficiency. This strong performance led to an upward adjustment of the company's adjusted EBITDA estimates for 2025 and 2026.
Recent developments at AvidXChange 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.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.