On Thursday, Piper Sandler adjusted its outlook for AvidXChange Holdings (NASDAQ: AVDX) shares, decreasing the price target to $9 from the previous $12, while maintaining a Neutral rating on the stock. The revision follows AvidXChange's second quarter results and full-year 2024 guidance, which reflected challenges faced by the company.
AvidXChange, a provider of accounts payable and payment automation solutions for the mid-market, reported quarterly revenues that fell 2% short of the consensus estimates.
The company's forecast for fiscal year 2024 now anticipates an 11% growth excluding Float and Political revenue, a decrease from the previously expected 15%. This adjustment was attributed to a downturn in discretionary spending among AvidXChange's midmarket customers.
The company has noted that year-to-date, buyer growth has surpassed plans, yet it is experiencing a downturn in spending volumes. Moreover, there has been a shift by existing suppliers towards payment methods that generate less revenue for AvidXChange.
Despite these challenges, the company highlighted its profitability, with adjusted EBITDA margins remaining stable at 17%, consistent with the previous quarter.
The analyst from Piper Sandler cited macroeconomic headwinds and the elevated one-time revenue benefits anticipated for fiscal year 2024, including from float and political sources, as reasons for adopting a more conservative stance on the company's growth outlook for fiscal year 2025 and beyond. The revised price target reflects a cautious approach as the firm awaits signs of improved revenue yield from new products and partnerships expected in 2025.
In other recent news, AvidXChange Holdings posted its first-ever GAAP net income in the second quarter of 2024. This was accompanied by a year-over-year revenue growth of over 15%, four consecutive quarters of positive free cash flow, and a robust non-GAAP gross margin of 72.6%.
However, Piper Sandler and UBS have both adjusted their outlooks for AvidXChange, citing concerns over the company's reduced revenue guidance for 2024 and shifts in customer behavior towards lower yielding payment methods.
The total revenue for 2024 is expected to range between $436 million to $439 million, with a non-GAAP adjusted EBITDA profit projected between $73 million to $75 million. Despite these challenges, AvidXChange remains optimistic about its growth prospects, driven by its AI-based customer offerings and strategic software integration partnerships in the real estate and media verticals.
The company is focusing on automating virtual card payments and leveraging AI to optimize processes, aiming to drive long-term opportunities of 20%+ revenue growth and 20%+ EBITDA margin. These are some of the recent developments at AvidXChange.
InvestingPro Insights
As AvidXChange Holdings (NASDAQ: AVDX) navigates through its fiscal challenges, the latest insights from InvestingPro provide a deeper understanding of the company's financial health and stock performance.
With a market capitalization of $1.86 billion, AvidXChange is currently grappling with a negative P/E ratio of -198.01, indicating that investors are expecting future earnings growth to justify the company's valuation. This expectation aligns with one of the InvestingPro Tips, which forecasts net income growth for the company this year.
InvestingPro Data also reveals a robust gross profit margin of 70.4% for the last twelve months as of Q2 2024, suggesting that despite the revenue challenges, AvidXChange maintains a strong ability to control costs relative to its sales.
However, the company's stock has experienced significant volatility, with a one-month price total return of -25.69% and a three-month return of -24.81%. This volatility is underscored by another InvestingPro Tip indicating that the stock generally trades with high price volatility.
For those considering an investment in AvidXChange, it is worth noting that the stock is currently in oversold territory according to the RSI, a metric that is often used by traders to gauge market sentiment.
Moreover, the current price is substantially below the fair value of $13.50 as estimated by analysts, with InvestingPro's own fair value calculation at $9.29, suggesting potential upside. For a more comprehensive analysis, investors can explore the additional 9 InvestingPro Tips available for AvidXChange, which cover various aspects of the company's performance and outlook.
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