On Monday, Baird adjusted its financial outlook for Bill.com Holdings Inc. (NYSE: NYSE:BILL), reducing the stock price target to $74 from $78 while maintaining a Neutral rating on the company's shares. The firm anticipates that Bill.com will report its fiscal third-quarter earnings in early May and expects revenues to surpass Wall Street's estimates. The anticipated increase is thought to be split between the company's core offerings and earnings from its float.
The firm acknowledges Bill.com as "a great company" but expresses a balanced stance due to its valuation at approximately 4.5 times its estimated calendar year 2024 revenue. The analyst points to several factors that could constrain earnings per share (EPS) growth over the coming years.
One noted concern is the high stock compensation expenses, which could lead to share dilution. Moreover, there is a potential for the company's tax rate to increase to around 25% from nearly 0%, which could impact net income.
Another factor that could affect Bill.com's profitability is the interest rate environment. The analyst notes that a significant portion of the company's earnings comes from interest revenue or income, indicating that a fall in interest rates could have a negative impact on the company's financial performance.
The early May earnings report will likely provide more clarity on the company's financial health and its ability to maintain growth in the face of these potential challenges. Bill.com's current position in the market and the upcoming fiscal data will be key for investors monitoring the company's performance and the validity of the revised price target.
InvestingPro Insights
As Baird revises its stance on Bill.com (NYSE: BILL) with a cautious outlook, investors may benefit from additional context provided by InvestingPro data and tips. The company's aggressive share buyback program, as noted in one of the InvestingPro Tips, indicates management's confidence in the company's value.
Moreover, Bill.com's solid cash position, with more cash than debt, and impressive gross profit margins of 85.65% in the last twelve months as of Q2 2024, provide a strong financial foundation.
Despite challenges highlighted by Baird, such as potential share dilution and tax rate increases, the company's revenue growth remains robust, with a 39.08% increase in the last twelve months as of Q2 2024. Analysts predict profitability this year, which could counteract the stock's 40.98% decline over the last six months. With a fair value estimate of $75.22 from InvestingPro, compared to Baird's $74 price target, there's a consensus on the potential upside from the current price of $60.99.
Investors looking for more in-depth analysis can access additional tips on Bill.com's financials and market performance on InvestingPro, with the opportunity to use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. The platform currently lists nine more InvestingPro Tips to help users make more informed decisions.
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