On Thursday, Lake Street Capital Markets updated its outlook on Alkami Technology Inc (NASDAQ:ALKT) shares, raising the price target to $36 from the previous $30 while maintaining a Buy rating on the stock.
The firm's decision reflects a positive view on the company's ability to capitalize on the increasing competition among financial institutions (FIs) to secure and retain customer deposits.
Alkami Technology, recognized for its banking software solutions, has been experiencing significant growth in its annual recurring revenue (ARR), attributed to a combination of acquiring new clients and cross-selling to existing ones.
The company's ARR to marketing expense ratio stands at an impressive 1.4 times, distinguishing it within the software-as-a-service (SaaS) sector.
The analyst from Lake Street Capital Markets noted Alkami's strategic investments in its platform, which are expected to substantially increase its market share among high average revenue per user (ARPU) bank customers. The shift in the company's pipeline mix is seen as evidence of gaining momentum in the market.
The firm anticipates Alkami to continue its growth trajectory, with revenue increases of over 25% and expanding margins, positioning it to meet the "Rule of 40" criteria—a benchmark for SaaS companies indicating strong performance through a combination of growth and profitability.
Despite the premium valuation at 7.6 times the projected 2025 revenue, the analyst believes the price is warranted. Alkami's consistent execution, market share gains, and high visibility are factors that justify the valuation and suggest the company's shares have the potential for further appreciation as investors recognize the leverage it is building at a profitable pace.
In other recent news, Alkami Technology Inc. demonstrated a solid financial performance in its Q2 2024 results, with a 25% increase in revenue and a significant adjusted EBITDA of $4.6 million.
The company also expanded its credit facility and received a J.D. Power certification for its mobile banking platform experience. Alkami Technology, which has 34 banks under contract, anticipates achieving an adjusted EBITDA margin of 20% by 2026.
Lake Street Capital Markets recently updated its outlook on Alkami, raising the price target to $36 from the previous $30 and maintaining a Buy rating.
The firm highlighted Alkami's ability to capitalize on the increasing competition among financial institutions to secure and retain customer deposits.
Alkami continues to invest strategically in its platform, a move expected to increase its market share among high average revenue per user bank customers. The company's growth trajectory is anticipated to continue, with revenue increases of over 25% and expanding margins.
The company's recent developments include signing eight new clients, bringing the total to 254, and expecting 30 banks live on its platform by Q1 2025.
Alkami's Q3 2024 revenue guidance is between $83.8 million to $85.3 million and adjusted EBITDA of $5.8 million to $6.8 million. The company ended the quarter with $87 million in cash and marketable securities and expanded its credit facility to $125 million.
InvestingPro Insights
Alkami Technology Inc (NASDAQ:ALKT) has garnered attention with its robust performance and strategic positioning in the competitive financial software sector. With a market capitalization of $3.19 billion and a notable revenue growth of 28.01% over the last twelve months as of Q1 2024, Alkami stands out for its capacity to scale and innovate. Despite not being profitable over the same period, with a P/E ratio of -60.73, analysts have revised their earnings upwards for the upcoming period, suggesting a positive shift in the company's financial trajectory.
Investors may find Alkami's high Price / Book multiple of 9.88 indicative of the market's confidence in its asset value and future growth potential. Moreover, the company's strong return over the last year, with a 95.52% price total return, underscores its impressive market performance. Alongside this, Alkami's liquid assets exceed short-term obligations, providing it with a stable financial cushion to navigate market volatility and invest in further growth.
For those seeking deeper insights and additional metrics, InvestingPro offers a comprehensive list of tips, including the prediction that Alkami will be profitable this year. With 13 additional InvestingPro Tips available, investors can access a wealth of information to guide their investment decisions at https://www.investing.com/pro/ALKT.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.