On Friday, B.Riley maintained a Buy rating on AudioEye (NASDAQ:AEYE) shares and raised its price target to $31.00 from $25.00. The firm highlighted the company's recent acquisition and improved financial guidance as key drivers for the adjustment.
In late September, AudioEye announced the acquisition of ADA Site Compliance, enhancing its web accessibility compliance solutions and bolstering customer acquisition efforts, particularly in the enterprise and public sectors.
The acquisition is expected to modestly contribute to AudioEye's fourth-quarter performance in 2024. Alongside this announcement, AudioEye also increased its third-quarter and full-year 2024 revenue and adjusted EBITDA guidance.
The company is now projecting a 12% year-over-year revenue growth for 2024, a significant increase from the 5% growth in 2023. Moreover, a substantial improvement is anticipated in the adjusted EBITDA margin, with projections indicating an 18% margin for 2024, up from approximately 4% in 2023.
The analyst noted the re-acceleration in revenue growth and the improved adjusted EBITDA margins, attributing these to better business execution and potential regulatory demand tailwinds.
Expected changes in regulations, such as the Department of Justice's final rule on Title II of the American Disabilities Act, the Department of Health and Human Services' final rule under Section 504 of the Rehabilitation Act, and the European Accessibility Act, are seen as factors that could drive further growth in 2025 and 2026.
In response to these developments, B.Riley has updated its financial models for AudioEye, raising estimates for 2024 and 2025 and introducing projections for 2026. These new estimates anticipate a 25% revenue growth and a 23% adjusted EBITDA margin for 2026. The price target increase to $31 reflects a roll-forward of the firm's unchanged enterprise value/sales multiple of approximately 7x to the 2026 model.
Despite AudioEye's shares surging 348% year-to-date, outperforming the Russell 2000 index's 12.5% gain, B.Riley suggests there could be further upside potential. The firm believes that the market may have conservative expectations for 2025, not fully accounting for the upcoming regulatory demand tailwinds.
In other recent news, AudioEye, a digital accessibility solutions provider, has seen a series of significant developments. Following the acquisition of ADA Site Compliance, a service offering audits and best practices for website accessibility, H.C. Wainwright has raised its price target for AudioEye from $23.00 to $28.00, maintaining a Buy rating.
The acquisition, which cost AudioEye $6.4 million, is expected to add between $2.0 million and $3.0 million to the company's annual revenue.
AudioEye has also revised its 2024 financial projections, raising its full-year revenue estimates to between $35.15 million and $35.25 million. Recent earnings reports show a 19% year-on-year increase, with revenues rising to approximately $8.5 million.
In addition, the company's annual recurring revenue (ARR) saw a 60% surge from the previous quarter, leading to a record adjusted EBITDA of around $1.5 million.
In terms of certifications, AudioEye has achieved both HIPAA compliance and SOC 2 Type II certification, emphasizing its commitment to data protection and security. This is particularly relevant for clients in healthcare and industries with strict data privacy regulations. These recent developments highlight AudioEye's ongoing growth and positive financial performance.
InvestingPro Insights
AudioEye's recent performance and future prospects align well with several InvestingPro metrics and tips. The company's impressive year-to-date price return of 347.6% corroborates B.Riley's observation of the stock's 348% surge. This exceptional performance is further supported by InvestingPro Tips highlighting strong returns over various timeframes, including the last month, three months, and five years.
The analyst's optimistic outlook on AudioEye's future profitability is reinforced by an InvestingPro Tip indicating that net income is expected to grow this year, with analysts predicting the company will be profitable in 2024. This aligns with the improved financial guidance mentioned in the article.
AudioEye's gross profit margin stands at an impressive 78.27% for the last twelve months as of Q2 2024, which is consistent with the InvestingPro Tip noting "impressive gross profit margins." This strong profitability metric supports the company's potential for improved adjusted EBITDA margins mentioned in the analyst report.
It is worth noting that InvestingPro offers 11 additional tips for AudioEye, providing investors with a more comprehensive analysis of the company's financial health and market position.
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