On Thursday, Barclays updated its assessment of Alkami Technology Inc (NASDAQ: ALKT), increasing the price target to $31 from $28, while maintaining an Equalweight rating on the stock. The adjustment reflects the firm's anticipation of a stronger performance from the company in the upcoming quarters.
Alkami Technology, a provider of cloud-based digital banking solutions, is expected to see the second quarter as the year's low point for user additions. This pattern aligns with the previous year's trends. Barclays projects approximately 510,000 net user additions for the quarter.
The company's growth is also being driven by its existing customer base, which is projected to expand by approximately 9-10% this year. This rate outpaces the market average and is contributing significantly to the company's overall net user growth for the fiscal year 2024.
Furthermore, Barclays anticipates that the second quarter will mark the lowest point for Alkami's EBITDA margins within the year. The firm forecasts an upward trajectory for the company, with Alkami expected to conclude the year with double-digit margins. This progress is deemed crucial for Alkami to meet its 20% margin target by the fiscal year 2026.
The revised price target of $31 is based on an enterprise value to sales (EV/Sales) multiple of approximately 8 times the fiscal year 2025 estimates. This represents an increase from the previous 7 times multiple, indicating an expectation for the company's value to expand alongside its vertical SaaS offerings.
In other recent news, Alkami Technology has reported robust financial results for the first quarter of 2024. The company's earnings surpassed expectations, with a 27% increase in subscription revenue to $76.1 million and a significant expansion of its gross margin by 360 basis points. Adjusted EBITDA also saw a notable rise, reaching $3.8 million.
The company's user base experienced substantial growth, reaching 18.1 million, a 19.8% increase from the previous year. This growth was buoyed by the successful addition and implementation of new clients during the quarter.
In addition, Needham maintained a Buy rating for Alkami and raised its share target to $32, citing the company's strong Q1 growth and positive outlook. The company's management team has also provided a positive outlook for the second quarter and upgraded the forecast for the full fiscal year 2024.
These recent developments point to Alkami's strong position in the market, underscored by its robust sales execution and favorable market conditions. As Alkami continues to focus on client satisfaction and product innovation, its growth trajectory appears promising.
InvestingPro Insights
Following Barclays' optimistic outlook, Alkami Technology Inc (NASDAQ: ALKT) shows promise with several positive indicators. InvestingPro data highlights a substantial revenue growth of 28.01% over the last twelve months as of Q1 2024, outpacing many competitors. This growth is further supported by a robust gross profit margin of 55.53%, signaling efficient operations and a strong market position. Additionally, with a market capitalization of $2.95 billion, Alkami's scale is notable in the digital banking solutions sector.
InvestingPro Tips suggest a favorable trend, as seven analysts have revised their earnings upwards for the upcoming period, and the company is expected to be profitable this year. Moreover, Alkami's liquid assets exceed its short-term obligations, providing financial stability and the ability to invest in future growth. These insights, coupled with a high return over the last year and a strong performance over the last three months, reflect a positive trajectory for Alkami's stock.
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