Tuesday, an analyst from Craig-Hallum increased the stock price target for Agilysys Inc (NASDAQ: NASDAQ:AGYS) to $125 from $105, maintaining a Buy rating on the stock. The adjustment reflects confidence in the company's business quality, competitive positioning, and the potential to capitalize on a significant market opportunity.
Agilysys, known for its hospitality and point-of-sale (POS) software solutions, is seen as competing effectively against more established, slower-moving companies in the industry. The analyst highlighted the company's strong balance sheet and the "stickiness" of its offerings, which suggests that clients are likely to continue using Agilysys products due to their integral role in operations.
The rationale behind the new price target also includes the company's substantial addressable market, estimated at approximately $4.8 billion, compared to its current annual recurring revenue (ARR) of around $140 million. This gap indicates a considerable growth runway for Agilysys.
The firm's assessment indicates that while Agilysys's stock may appear costly based on near-term earnings expectations, its long-term earnings potential is likely understated. Current elevated product development costs and one-off investments, particularly those associated with the ramping up of the Marriott contract, are seen as temporarily obscuring the company's true earnings capability.
In terms of valuation, the analyst's price target is based on a projected gross profit multiple of approximately 14 times the firm's fiscal year 2026 estimate of $242 million in gross profit. This is a premium compared to the average trade at 7 times calendar year 2025 gross profit for hospitality/POS vertical software companies, and 10 times for vertical software companies in general. The analyst's stance suggests a conservatively biased outlook on growth and margin expectations for Agilysys.
In other recent news, Agilysys Inc. has been making significant strides in its financial performance and market presence. The company has reported record-breaking revenues for the ninth consecutive quarter, with a 17.6% increase in the fourth quarter of fiscal year 2024, reaching $62.2 million.
The full fiscal year revenue also set a record at $237.5 million, up 19.9% from the previous year. Agilysys projects revenue growth of 16% to 18% for fiscal 2025, expecting revenues between $275 million to $280 million.
In terms of strategic partnerships, Agilysys has secured a substantial deal with Marriott International (NASDAQ:MAR). This agreement involves the integration of the Agilysys Golf product suite into Marriott's hotels across North America, the Caribbean, and Latin America, extending the company's reach within the hospitality industry.
Analysts from firms such as William Blair, Needham, and Oppenheimer have shown confidence in Agilysys. William Blair initiated an Outperform rating on the company, highlighting its robust sales momentum. Needham maintained a Buy rating and increased the price target, while Oppenheimer also raised its price target for the company.
Agilysys has also demonstrated growth in subscription revenue, which now represents 55% of its total recurring revenue. The company has been successful in securing larger deals, evident from its recent agreements with Marriott for Property Management Systems and Point of Sale systems. These recent developments are indicative of Agilysys's positive trajectory in the market.
InvestingPro Insights
Following the recent analyst upgrade, real-time data from InvestingPro highlights several key metrics for Agilysys Inc (NASDAQ: AGYS) that investors may find pertinent. The company's market capitalization stands at $3.02 billion, with a P/E ratio of 31.14 indicating a significant market expectation of future earnings growth. This aligns with the analyst's optimistic view on the company's long-term earnings potential. Furthermore, Agilysys has demonstrated substantial revenue growth over the last twelve months as of Q4 2024, with an increase of 19.89%, which may underpin the analyst's confidence in the company's growth runway.
InvestingPro Tips also reveal that Agilysys holds more cash than debt on its balance sheet, a sign of financial health that supports the analyst's mention of a strong balance sheet. Additionally, the company's liquid assets exceed short-term obligations, providing further evidence of the company's solid financial positioning. Still, it is worth noting that three analysts have revised their earnings downwards for the upcoming period, which could be a point of concern for potential investors.
For those interested in a deeper analysis, InvestingPro offers additional insights and tips on Agilysys, which can be found at https://www.investing.com/pro/AGYS. Readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking access to a total of 19 InvestingPro Tips for a comprehensive investment strategy.
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