On Monday, Alight Solutions (NYSE:ALIT), a leading cloud-based provider of integrated digital human capital and business solutions, saw its shares target lowered to $12.00 from $14.00 by DA Davidson, although the firm continues to recommend a Buy rating for the stock. This adjustment follows Alight's first-quarter results, which fell slightly short of expectations in terms of revenue and earnings.
The company recently announced their Q1 performance, revealing figures that did not align with the forecasts set by analysts. In response to the quarterly update and the company's current standing, DA Davidson revised its revenue and adjusted EBITDA projections for Alight Solutions. Despite the adjustment in financial expectations, the firm reaffirmed its confidence in the company's stock by maintaining a Buy rating.
Alight's management has chosen not to reassert their prior guidance for 2024 due to a pending divestiture. Instead, they have reiterated the mid-term financial outlook that was presented in March.
The outlook projects an annual revenue growth of 4%-6%, with adjusted EBITDA margins expected to increase from 22%—25% pro forma for the pending divestitures—to 28%, and a net leverage ratio below 3.0 times.
The analyst from DA Davidson noted, "Alight reported 1Q results with revenue and earnings measures both a bit below our forecasts. Given the pending divestiture, management did not affirm their prior guidance ranges for 2024.
Rather they affirmed the mid-term outlook that they provided in March, which included 4%-6% annual revenue growth, adjusted EBITDA margins moving from 22% (25% pro forma for the pending divestitures) to 28%, and a net leverage ratio below 3.0 times.
Following the 1Q update, we have trimmed our revenue and adjusted EBITDA forecasts. We are maintaining our BUY rating on Alight but trimming our price target to $12 (from $14)."
InvestingPro Insights
As Alight Solutions (NYSE:ALIT) continues to navigate through its divestiture process and aims for its mid-term financial goals, real-time data and analysis from InvestingPro provide a deeper perspective on the company's current valuation and stock performance. According to InvestingPro, Alight's market capitalization stands at $4.23 billion, with a negative P/E ratio of -10.06 reflecting its lack of profitability over the last twelve months. Nonetheless, analysts predict that the company will turn profitable this year, which could be a pivotal moment for investors. The stock also appears to be trading at a relatively low price/book ratio of 0.94, suggesting that it may be undervalued relative to its assets.
InvestingPro Tips for Alight Solutions indicate that while net income is expected to grow, the stock has been under pressure, with a significant price drop over the last three months and a recent fall into oversold territory according to the RSI. This could signal a potential buying opportunity for investors who believe in the company's long-term prospects. Additionally, with liquid assets exceeding short-term obligations, Alight shows a degree of financial resilience. For those looking to delve deeper into Alight's financial health and stock potential, InvestingPro offers additional tips. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and uncover more insights on whether Alight is poised for a rebound or if the recent price target adjustment by analysts is just the beginning of a longer trend.
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