On Tuesday, TD Cowen maintained its positive stance on Grid Dynamics Holdings (NASDAQ:GDYN), reiterating a Buy rating and a price target of $16.00. The firm highlighted the recent acquisition of Mobile Computing, a software development vendor based in Argentina, by Grid Dynamics.
The acquisition is noted as a strategic move to enhance Grid Dynamics' nearshore delivery capabilities into the United States market. With the addition of Mobile Computing, Grid Dynamics now has a presence in Argentina, which is expected to bolster its service offerings.
The firm from which the analyst hails emphasized the value of the new acquisition, pointing to the expanded client base that Grid Dynamics will now have access to. The acquired company brings with it a portfolio of blue-chip clients from various industries, including technology, manufacturing, consumer packaged goods, and BFS (banking and financial services).
The analyst's comments suggest that the acquisition is a "tuck-in deal," implying that it is expected to integrate smoothly with Grid Dynamics' existing operations without significant restructuring or changes to the core business.
According to the firm's analysis, the acquisition of Mobile Computing is projected to contribute approximately three or more percentage points to Grid Dynamics' annualized inorganic growth. This estimation reflects the anticipated positive impact of the acquisition on the company's financial performance.
In other recent news, Grid Dynamics has made substantial strides in its growth strategy with the acquisition of Buenos Aires-based Mobile Computing S.A. and UK-based JUXT. The acquisition of Mobile Computing is aimed to enhance Grid Dynamics' delivery capabilities across the Americas and expand its client portfolio in key industries such as manufacturing, consumer packaged goods, and financial services.
The acquisition of JUXT, specializing in data-intensive systems for the financial sector, is set to strengthen Grid Dynamics' presence in the financial services industry and contribute to an anticipated annual performance increase, as noted by analysts from TD Cowen.
Grid Dynamics also announced record-breaking results for the second quarter of 2024, exceeding both revenue and non-GAAP EBITDA forecasts, driven by growth in the retail and finance sectors, and an expanded customer base. The company's robust cash position of approximately $250 million is facilitating the exploration of further M&A opportunities. Furthermore, Grid Dynamics reported a significant increase in its number of billable engineers, reaching a total headcount of 3,961 employees.
However, a decline in revenue from the TMT and CPG/manufacturing sectors was reported. Despite this, the company's focus on enhancing AI capabilities has earned it recognition with four industry awards. For the third quarter, Grid Dynamics expects revenues to fall between $84 million and $86 million.
InvestingPro Insights
Grid Dynamics Holdings' recent acquisition of Mobile Computing aligns well with several key financial indicators and trends highlighted by InvestingPro. The company's strong cash position, as noted by the InvestingPro Tip that it "holds more cash than debt on its balance sheet," provides a solid foundation for strategic acquisitions like this one. Additionally, the expectation that "net income is expected to grow this year" suggests that the company is on a positive trajectory, which could be further accelerated by the expanded client base and nearshore capabilities gained through the Mobile Computing acquisition.
The InvestingPro data shows a robust 3-month price total return of 33.18%, indicating strong market confidence in Grid Dynamics' recent strategies. This positive sentiment is reinforced by the fact that the stock is trading near its 52-week high, with a price at 96.12% of its 52-week peak. The company's revenue of $318.34 million for the last twelve months as of Q2 2023, combined with a gross profit margin of 35.65%, demonstrates a solid financial foundation upon which to integrate the new acquisition.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for Grid Dynamics Holdings, providing deeper insights into the company's financial health and market position.
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