On Thursday, i3 Verticals (NASDAQ:IIIV), a provider of integrated payment and software solutions, maintained its positive outlook from analysts at DA Davidson. Following the recent completion of a significant divestiture, the firm has reiterated a Buy rating and a $32.00 price target on the company's shares.
i3 Verticals announced in late September that it had completed the sale of its Merchant Services business, along with two smaller divisions, for a total of $438 million in cash. The transaction is seen as a strategic move that transforms i3 Verticals into a company focused solely on Vertical Software, serving key sectors such as Public Sector, Education, and Healthcare.
In light of these changes, DA Davidson has updated its financial forecasts for i3 Verticals, fine-tuning the projections for the fourth quarter of fiscal year 2024 and the full fiscal year 2025. Additionally, the firm has introduced new forecasts for the fiscal years 2026 and 2027.
The analyst from DA Davidson noted the divestiture as a positive development, emphasizing the company's refocused strategy on three strategic verticals. The maintained Buy rating and $32 price target reflect confidence in i3 Verticals' future performance following the divestiture and strategic realignment.
In other recent news, i3 Verticals has wrapped up the sale of its merchant services segment to Payroc for approximately $438 million in cash, a strategic move to enhance the company's focus on its core vertical software markets including public sector, education, and healthcare.
This development coincides with changes in i3 Verticals' executive team, with Geoff Smith stepping into the role of Chief Financial Officer. The former CFO, Clay Whitson, transitions to the role of Chief Strategy Officer, a position where he will focus on capital allocation, mergers and acquisitions, and investor relations.
KeyBanc Capital Markets maintained its Overweight rating on i3 Verticals shares, with a steady price target of $27.00, following these significant corporate developments.
In their Q3 2024 results, i3 Verticals reported a decline in revenues and adjusted EBITDA, primarily due to lower one-time software license sales. However, the company anticipates high-single-digit organic revenue growth and EBITDA margin improvement for fiscal years 2024 and 2025.
A noteworthy recent development for i3 Verticals is its acquisition in the Public Sector vertical, projected to drive double-digit growth in fiscal year 2025. The company also emphasized its robust balance sheet and strategy to reduce debt by paying down its revolving credit facility.
InvestingPro Insights
To complement the analysis of i3 Verticals' recent strategic divestiture and DA Davidson's positive outlook, let's examine some key financial metrics and insights from InvestingPro.
According to InvestingPro data, i3 Verticals has demonstrated strong revenue growth, with a 46.48% increase in the last twelve months as of Q3 2024. This aligns with the company's strategic focus on high-growth verticals like Public Sector, Education, and Healthcare. The company's gross profit margin stands at an impressive 77.69%, indicating efficient operations in its core business areas.
InvestingPro Tips suggest that while i3 Verticals was not profitable over the last twelve months, analysts predict the company will be profitable this year. This expectation could be linked to the recent divestiture and the company's renewed focus on its most promising segments.
Another relevant InvestingPro Tip highlights that i3 Verticals' liquid assets exceed short-term obligations, which could provide financial flexibility as the company navigates its strategic transformation.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for i3 Verticals, providing a deeper understanding of the company's financial health and market position.
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