Tuesday, Stephens initiated coverage on Asure Software (NASDAQ:ASUR) with an Overweight rating and set a price target of $13.00. The firm's optimistic stance stems from Asure's potential growth, anticipating the company's revenue to scale to $200 million with a 30% margin. This projection is a significant increase from the forecasted $126 million in revenue and 20% margin for the fiscal year 2024.
The positive outlook is attributed to the expected performance of Asure's core payroll business, its enterprise-focused tax business, and the strategy to internalize mergers and acquisitions (M&A) as well as reseller operations. These elements are seen as key drivers that could propel the company's financial metrics upward.
Despite the potential for growth, there are noted risks including the current sub-scale size of Asure's platform and the execution risk associated with the M&A strategy. Additionally, earnings-related noise such as the Employee Retention Tax Credit (ERTC) and the impact of M&A activities have been acknowledged as factors that may lead to a discounted valuation compared to industry peers.
However, the firm believes there is considerable potential for an expansion in Asure's multiple as the company progresses towards achieving its targets. The strategic moves outlined by Asure, if successfully implemented, could enhance the company's market position and financial strength.
The rating and price target announcement is expected to be of interest to investors and market watchers, as it reflects an analyst's confidence in Asure Software's strategy and growth prospects. The Overweight rating suggests that the analyst believes the stock has a better value proposition compared to others in the sector.
In other recent news, Asure Software, Inc. has made noteworthy strides in its operations. The company has reported strong second quarter results in 2024, with revenues reaching $28 million and an 18% increase in recurring revenues.
This performance was largely driven by Asure's Marketplace offering, Payroll Tax Management, and interest from funds held for clients. Over the past 10 months, Asure completed nine acquisitions, including the acquisition of HireClick, a hiring solution for small and mid-sized businesses, which is expected to enhance Asure's recruitment process capabilities.
Asure's recent acquisitions have contributed approximately $15 million to its annual recurring revenue. The company projects robust growth for the second half of 2024, with anticipated revenues between $123 million and $129 million and adjusted EBITDA margins of 20% to 21%. Asure sees a strong cross-sell demand with 70% of sales from new customers and 30% from existing customers.
In addition, Asure is set to further expand its product offerings and sales force, aiming for a 50-50 split between organic and inorganic growth for the remainder of 2024. More details on Asure's progress and projections for 2025 will be provided in the upcoming November call.
InvestingPro Insights
Adding to Stephens' optimistic outlook on Asure Software (NASDAQ:ASUR), recent data from InvestingPro provides additional context to the company's financial position and market performance. Despite the company not being profitable over the last twelve months, InvestingPro Tips highlight that net income is expected to grow this year, aligning with Stephens' projections for revenue scaling and margin improvement.
Asure's impressive gross profit margins, standing at 69.9% for the last twelve months as of Q2 2024, support the analyst's positive view on the company's potential for improved financial metrics. This high margin suggests efficiency in core operations, which could be crucial as Asure aims to scale its revenue.
It's worth noting that while Stephens set a price target of $13.00, InvestingPro data shows a fair value of $15.50 based on analyst targets, indicating potential upside beyond the initial projection. However, investors should consider that six analysts have revised their earnings downwards for the upcoming period, which may reflect some of the execution risks mentioned in the article.
For those interested in a deeper dive into Asure Software's financials and market position, InvestingPro offers 7 additional tips and a comprehensive set of real-time metrics to inform investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.