Wednesday - Litchfield Hills Research has begun coverage on Usio Inc. (NASDAQ:USIO) with a Buy rating, setting a stock price target of $6.00. The research firm's initiation report highlights Usio's position in the rapidly expanding electronic payments sector and its potential for growth in a society increasingly moving away from cash transactions.
According to Federal Reserve data, non-cash payments have been growing at a compound annual growth rate (CAGR) of 7% from 2018 to 2021. Usio has outpaced this trend, achieving a 24% revenue CAGR over the past five years, a period that also includes the impact of an acquisition. Litchfield Hills Research points to Usio's innovative edge in the industry and its success in gaining market share.
The report outlines five significant achievements for Usio in the last decade, including three successful acquisitions and two major customer wins. The company's management team is praised for its extensive experience in the payments industry, which is expected to drive further success.
The Payment Facilitator (PayFac) business, launched by Usio in 2017, has been gaining traction with three potential customers, each discussing deals worth over $5 million. A notable customer, generating over $20 million in annual recurring revenue, has already been signed and is currently in the process of on-boarding.
With these developments, Litchfield Hills Research anticipates Usio's stock to rise significantly above its previous year's trading range of $1.50 to $2.20, reaching the firm's $6.00 price target. The analyst's commentary underscores the belief in Usio's continued growth within the electronic payments industry, driven by both internal innovation and external market trends.
In other recent news, Usio Inc., a payment solutions provider, reported its Q1 earnings for 2024, with a revenue of $20.3 million, which fell short of H.C. Wainwright's expectation of $23.2 million. Despite this, Usio maintains its full-year revenue growth forecast, projecting an increase of 10.0% to 12.0%.
This projection is backed by a significant contract that could potentially generate around $20 million annually at full scale. Moreover, Usio's pipeline, which includes discussions with several large potential clients, is expected to boost revenue in the second half of 2024 and into 2025.
The company's commitment to cost control is anticipated to yield significant operating leverage, with adjusted EBITDA growth outpacing revenue increases. This is expected to contribute to a favorable profit margin and positive earnings per share within the year. H.C. Wainwright continues to maintain a 'Buy' rating on Usio, suggesting that the current undervaluation should correct itself as the company continues to meet its financial targets.
In the first quarter of fiscal year 2024, Usio reported a strong start, with card loads more than doubling and setting a new quarterly record. The company's ACH business growth and a significant contract in the card business are expected to offset the impacts of the wind down of a COVID incentive program and a low-margin large plastic card order. These are the recent developments in the company's financial landscape.
InvestingPro Insights
As Usio Inc. (NASDAQ:USIO) embraces the shift towards electronic payments, real-time data from InvestingPro highlights some key financial metrics. Usio's market capitalization stands at $40.97 million, reflecting its position in the competitive payments landscape.
Despite a challenging past twelve months where the company was not profitable, analysts predict a turnaround with net income expected to grow this year. This aligns with Litchfield Hills Research's positive outlook and $6.00 price target.
InvestingPro data also shows a revenue increase of nearly 12% over the last twelve months as of Q1 2024, indicating a strong top-line growth that outpaces the industry average. Still, the company's gross profit margin at 21.97% points towards an area that could benefit from optimization, as noted in one of the InvestingPro Tips which mentions weak gross profit margins. Moreover, the stock's price volatility is evident, with a 16.67% decrease over the last three months, yet there is an analyst consensus that the company will reach profitability this year.
For investors looking to delve deeper into Usio's financial health and stock performance, InvestingPro offers additional tips beyond the insights here. With the coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable resources. Discover more InvestingPro Tips to inform your investment decisions in Usio at https://www.investing.com/pro/USIO.
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