On Thursday, JPMorgan (NYSE:JPM) raised the price target on AvidXChange Holdings (NASDAQ: AVDX) to $10 from the previous $9 while maintaining a Neutral rating. The adjustment follows AvidXChange's third-quarter results, which sparked optimism due to an inflection in same-store transactions and upbeat new sales commentary looking towards 2025. Management's positive outlook, despite a challenging macro environment that affected the previous quarter, has provided grounds for a more positive sentiment in the stock.
AvidXChange's stock experienced a significant rally on the back of these results, outperforming the broader market. The company's third-quarter performance notably included a $1 million increase in float income expectations, which contributed to a modest raise in the fiscal year 2024 revenue outlook. Additionally, the EBITDA guidance for FY24 was raised to reflect the extent of the third-quarter beat.
Looking ahead to 2025, JPMorgan now models an 8% reported growth for AvidXChange, a deceleration from the 15% expected in 2024. However, when excluding float and political ad revenues, the core revenue growth is estimated at 13%, which would mark a 2 percentage point acceleration from 2024. This growth projection is supported by a firmer same-store transaction growth, an improved outlook for new sales, and the potential impact of new products, such as Payment Accelerator 2.0.
Despite the positive trends observed in the third quarter, JPMorgan remains cautious, seeking more consistency in AvidXChange's results before confirming an inflection point and a clear path back to previous mid-term growth targets. The firm cites the tough float and political ad revenue comparisons expected next year as factors warranting a conservative stance. Nonetheless, the third-quarter trends have been encouraging for AvidXChange and the broader business-to-business (B2B) sector, with the market eagerly anticipating the upcoming BILL results for further indications of sector health.
In other recent news, AvidXchange Holdings, Inc. reported a strong financial performance in its Q3 2024 earnings call, including a significant year-over-year revenue increase and improved gross margins. The company also raised its 2024 business outlook, reflecting confidence in its growth trajectory. Q3 revenue reached $113 million, a 14% increase year-over-year, and non-GAAP gross margins rose to 74.5%. The company also initiated a $100 million share repurchase program.
Strategic partnerships and market expansion, particularly in the healthcare sector and with regional banks, are driving growth. AvidXchange ended Q3 with a strong balance of $394.3 million in cash and marketable securities. The company's 2024 revenue forecast is between $437 million and $439 million, with an adjusted EBITDA projection of $78 million to $79 million. Despite potential challenges from political uncertainty and interest rate changes, company targets 50% to 55% growth for 2025.
InvestingPro Insights
AvidXChange Holdings (NASDAQ: AVDX) has shown promising signs in its recent performance, aligning with JPMorgan's raised price target. InvestingPro data reveals that AVDX has a market capitalization of $1.99 billion and has demonstrated strong returns recently, with a 17.48% increase over the past week and a 26.37% gain over the last month. These figures support the positive momentum mentioned in the article.
InvestingPro Tips highlight that net income is expected to grow this year, and analysts predict the company will be profitable this year. This outlook corresponds with the optimistic sentiment expressed in JPMorgan's analysis and management's positive commentary for 2025. However, it's worth noting that AVDX is not currently profitable over the last twelve months, which underscores the importance of the projected turnaround.
The company's revenue growth of 19.31% over the last twelve months and a robust gross profit margin of 70.4% indicate a solid foundation for future growth, potentially supporting the acceleration in core revenue growth projected by JPMorgan for 2025.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for AVDX, providing deeper insights into the company's financial health and market position.
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