On Thursday, UBS adjusted its outlook on E2open Parent Holdings (NYSE:ETWO) shares, reducing the price target to $4.20 from the previous $4.50 while maintaining a Neutral rating on the company's stock.
The revision follows E2open's reported revenue miss for the first quarter of fiscal year 2025. E2open's subscription revenue growth fell short by 2.6%, slightly below the midpoint of their guidance, and professional services revenue came in at $19.8 million, which was below the expected $23 million. This shortfall was attributed to an increase in non-billable professional services work during the quarter.
Despite the lower than anticipated revenues, E2open has reiterated its full-year revenue guidance for fiscal year 2025, suggesting a forecasted acceleration in sequential revenue growth in the second half of the year.
The company anticipates improvements in customer churn and retention as the year progresses, with churn rates having peaked in the first quarter. Additionally, E2open is investing in its challenged clients to bolster retention rates.
UBS's stance remains cautious, suggesting that the current outlook from E2open leaves little margin for additional macroeconomic downturns or further execution mishaps. The professional services revenue miss indicates that E2open may still be grappling with operational challenges.
UBS's position reflects a wait-and-see approach, as the firm advises patience and opts to remain on the sidelines for the time being. The reaffirmation of a Neutral rating indicates a watchful but not bullish posture on E2open's stock.
In other recent news, E2open Parent Holdings Inc. has maintained its full-year guidance for fiscal year 2025, despite experiencing some delays in deal closures during the first quarter.
The company has expressed confidence in its ability to improve churn and accelerate bookings throughout the year. E2open has exceeded its internal Annual Recurring Revenue (ARR) retention targets for Q1 FY '25 and aims for further reductions in churn.
The company's full-year subscription revenue is projected to be between $532 million and $542 million, with total revenue for FY '25 expected to be within $630 million to $645 million. Also, the company is progressing with a strategic review that was announced in March.
Despite the delays in Q1 deal closures, which resulted in lighter subscription bookings, E2open managed to close nearly half of the delayed Q1 deals in Q2. The company anticipates a decrease in churn over the next three quarters, leading to normalized levels by Q4. These are some of the recent developments in E2open's business operations.
InvestingPro Insights
As E2open Parent Holdings (NYSE:ETWO) navigates through its fiscal challenges, the data from InvestingPro provides a nuanced view of the company's financial health. With a market capitalization of approximately $1.5 billion and a Price to Book ratio close to parity at 1.01, ETWO presents a tangible book value that might attract certain investors. Analysts on InvestingPro are keeping a close watch on the company's performance, noting that although ETWO has not been profitable over the last twelve months, there is an expectation of profitability within this year. This aligns with E2open's own projections of an uptick in revenue growth in the latter half of fiscal year 2025.
InvestingPro Tips indicate that ETWO does not distribute dividends, which could be a factor for income-focused investors to consider. Additionally, the company has shown a Revenue Growth decline of -2.71% in the last twelve months as of Q4 2024, which may raise concerns about its ability to meet future revenue guidance. Despite these challenges, the Gross Profit Margin remains robust at 66.17%, suggesting that E2open maintains a strong core profitability on its services when it does generate revenue.
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