Needham has raised the price target on OneStream Inc. (NASDAQ: OS) to $35 from $33 while maintaining a Buy rating on the shares.
The adjustment follows OneStream's reported second-quarter results, which met the high end of the company's expected range. OneStream, which has recently gone public, showcased a robust start, aligning with analyst expectations.
OneStream's fiscal year 2024 revenue guidance encompassed analyst estimates, with third-quarter subscription revenue growth forecasted at 35%, surpassing the anticipated 30%.
The increase indicates potential sales momentum or higher deal volumes at the start of the quarter. The company's current Remaining Performance Obligations (RPO) saw a year-over-year increase of 41%, reinforcing the perspective of strong market demand.
The management team at OneStream provided positive insights into the demand for the company's core solutions.
Additionally, they emphasized the growing influence of artificial intelligence (AI) in their offerings. This focus on AI is expected to provide a subtle yet significant boost to the company's revenue growth into fiscal year 2025.
OneStream's trajectory towards profitability by the end of fiscal year 2024 is anticipated to further support the stock's performance.
In other recent news, BofA Securities increased its share price target to $36, maintaining a Buy rating, due to the company's strong performance in total revenues, non-GAAP operating income, and free cash flow. The firm also noted OneStream's potential to capture a significant portion of the $44 billion total addressable market.
Similarly, Truist Securities reiterated a Buy rating and a $35.00 price target, emphasizing OneStream's alignment with previous estimates and the importance of the company's upcoming third-quarter and full-year forecasts.
Other financial firms, including Scotiabank, Needham, and TD Cowen, also initiated coverage with Buy ratings, recognizing OneStream's potential for sustained high revenue growth rates, integration of machine learning and artificial intelligence technologies, and significant free cash flow margin expansion.
InvestingPro Insights
In light of OneStream Inc.'s positive second-quarter results and the subsequent price target raise by Needham, InvestingPro data provides additional context for investors considering the stock. OneStream's market capitalization stands at $7.1 billion, reflecting a significant size in the market. Despite not being profitable over the last twelve months, as indicated by a negative P/E ratio, the company's revenue growth is noteworthy, with a substantial quarterly increase of nearly 40%. This aligns with the strong sales momentum hinted at by OneStream's guidance and RPO growth.
The robust gross profit margin of approximately 70% underscores the company's ability to retain a majority of its revenue after accounting for the costs of goods sold, which can be an indicator of pricing power and operational efficiency. However, it's important to note that OneStream is trading at a high revenue valuation multiple and is near its 52-week high, suggesting that the stock's current price already reflects a degree of optimism about its growth prospects.
For investors seeking further analysis, there are additional InvestingPro Tips available, which highlight that OneStream operates with a moderate level of debt and does not pay a dividend, potentially affecting the investment strategies of income-focused investors. For those interested in a deeper dive into OneStream's financials and potential investment strategies, more InvestingPro Tips can be found at Investing.com/pro/OS.
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