On Friday, Procore Technologies , Inc (NYSE:PCOR) experienced a shift in its stock rating as Barclays adjusted its stance on the company. The construction software maker was downgraded from 'Overweight' to 'Equalweight', with a significant reduction in the price target to $54.00, down from the previous $78.00. The adjustment reflects Barclays' assessment of the company's strategic changes and growth prospects.
The downgrade comes as Procore transitions to a general-manager based model and aims to establish a new channel presence alongside hiring product specialists.
Although not a complete shift to a channel model, Barclays sees this as a considerable alteration in Procore's go-to-market strategy that is expected to take place mid-year.
Barclays anticipates that the changes Procore is implementing, while potentially beneficial in the long term, are likely to cause disruption through at least fiscal year 2025 (FY25). The firm also notes that Procore may require additional investment to catch up after several years of focusing on margin expansion.
The analysis by Barclays also considers Procore's second-quarter committed monthly recurring revenue (CRPO) growth, which was in the mid-teens.
The firm projects that growth could slow to low-teens in the fourth quarter of 2024 through fiscal year 2026, aligning with similar revenue growth predictions. Barclays expects around a 100 basis point margin expansion annually, contingent on the rate of sales hiring.
The revised price target is based on a valuation methodology looking ahead to fiscal year 2026's enterprise value to free cash flow (EV/FCF), with a 39x multiple assigned by Barclays. This new target aligns with the after-hours trading levels observed for Procore's shares.
In other recent news, Procore Technologies has been the focus of several analyst adjustments. Barclays downgraded the construction software maker from 'Overweight' to 'Equalweight' and lowered the price target to $54.00, due to strategic changes and growth prospects.
KeyBanc, on the other hand, slightly reduced its price target from $80 to $79, maintaining an 'Overweight' rating, based on recent construction industry data.
TD Cowen maintained a 'Buy' rating on Procore Technologies with an $85.00 price target, citing the company's strong position in the construction industry. The firm's analysis suggests a potential for over 20% growth in 2025, supported by the inclusion of artificial intelligence insulation.
BMO Capital also maintained an 'Outperform' rating and an $85.00 price target. The firm highlighted stable yet challenging bookings environment within the construction industry, but expects stronger cRPO growth by the fourth quarter.
In contrast, Mizuho Securities downgraded Procore Technologies from 'Buy' to 'Neutral', revising the price target to $70. The firm cited near-term weakness in the construction sector as the reason for the adjustment.
These recent developments reflect various perspectives on Procore's performance and future prospects in the construction industry.
InvestingPro Insights
As Procore Technologies, Inc (NYSE:PCOR) navigates strategic shifts and Barclays' recent downgrade, it's crucial for investors to consider up-to-date financial metrics and expert insights. According to InvestingPro, Procore holds an impressive gross profit margin of 82.2% for the last twelve months as of Q1 2024, highlighting the company's ability to manage production costs effectively. Despite not being profitable over the last twelve months, analysts predict that Procore will achieve profitability this year, a key factor for potential investors.
InvestingPro Data further reveals that Procore's market capitalization stands at $9.84 billion, with a high Price / Book multiple of 8.24, reflecting a premium valuation compared to book value. The company's revenue growth remains robust at 29.93% over the last twelve months as of Q1 2024. However, it's important to note that Procore is trading at a negative P/E ratio, specifically -69.95, indicating that the company is currently unprofitable.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available that provide a comprehensive understanding of Procore's financial health and market position. These insights can be accessed through the InvestingPro platform, which offers an array of valuable tools and data for informed investment decisions.
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