On Tuesday, Stephens made an adjustment to the price target for NCR Voyix (NYSE: NYSE:VYX), lowering it from $19.00 to $16.00, while keeping an Overweight rating on the stock. The firm's analysis indicates that despite a 14% drop in share price following recent earnings, there are still pathways to value growth for the company.
These include potential growth in Annual Recurring Revenue (ARR) driven by platform strategies, as well as a stabilization in hardware sales. Another scenario that could contribute to value growth is the possible sale of the company's digital banking division or the entire company.
The management of NCR Voyix has reiterated its targets for mid-single-digit revenue growth and slightly faster EBITDA growth. However, the reduction in the 2024 guidance, which has been revised since September 2023, raises concerns about the company's visibility and control. Challenges such as a declining hardware refresh cycle, a delayed annual report, issues with a fraudulent wire transfer, and complications from a company split have all contributed to these concerns.
Despite these issues, Stephens notes that if NCR Voyix's platform strategy successfully accelerates ARR growth, which was around 5% in the fourth quarter of 2023, and the company's efficiency program achieves its goal of $100 million in savings, the company could still meet its leverage targets by the end of 2024. The leverage ratio is expected to improve from 3.7 times to between 3.3 and 3.4 times.
The sale of the digital banking segment is another potential development that could positively impact the company's financial position. Such a sale could bring in between $2 billion to $2.2 billion, which would allow for faster deleveraging and provide NCR Voyix with a stronger position to invest in its Retail and Restaurant businesses.
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