On Thursday, Morgan Stanley (NYSE:MS) analyst Chris Quintero upgraded Bill.com Holdings Inc. (NYSE: NYSE:BILL) stock from Equalweight to Overweight and increased the price target to $105 from $95. The upgrade comes as Bill.com demonstrates strong financial health with an impressive 85% gross profit margin and 18.5% year-over-year revenue growth.
Quintero's previous concerns regarding the company's growth prospects and take rate expansion have been addressed by recent strategic shifts and market developments.
The analyst noted that the downgrade to Equalweight was based on skepticism about the adoption of virtual cards in the small and medium-sized business (SMB) market. However, this view has been validated as Core Revenue growth and the Standalone BILL Take Rate began to decline in the second fiscal quarter of 2024. This trend aligned with investors and consensus estimates, which have now adjusted to a more realistic outlook.
Bill.com's valuation reached as low as 3X next twelve months (NTM) Sales in August 2024, but the company has since taken steps to improve its virtual card product experience and address supplier cost sensitivity. The stock has shown remarkable recovery, posting a 56% gain over the past six months.
According to InvestingPro analysis, the company appears fairly valued at current levels, with 12 additional exclusive insights available to subscribers. Additionally, the churn rate of virtual cards has been a factor in the take rate expansion slowdown.
Looking ahead, Quintero is optimistic about Bill.com's new strategy, which includes addressing virtual card product issues, introducing new payment products and capabilities, and moving upmarket. The company's strong execution of this strategy, coupled with a positive shift in SMB spending trends, provides a foundation for potential positive estimate revisions. These revisions are expected to be against low consensus estimates and even lower buyside expectations.
Quintero also anticipates potential for multiple upside in 2025, suggesting that the current valuation of Bill.com does not fully reflect the company's future growth potential. While the stock currently trades at a high earnings multiple, InvestingPro's comprehensive research report, available for over 1,400 US stocks, provides detailed valuation analysis and growth projections.
The upgraded rating and higher price target reflect Morgan Stanley's confidence in the company's direction and the anticipated response of the market to these developments.
In other recent news, BILL Holdings Inc. has made noteworthy strides with the appointment of new directors and positive analyst ratings. The company announced the addition of Keri Gohman and Dan Wernikoff to its board, filling the gap left by retiring directors Peter Kight and Scott Wagner. These appointments coincide with strong financial health and an 18.5% revenue growth over the last year.
KeyBanc Capital Markets maintained an Overweight rating on BILL Holdings, projecting revenues and adjusted operating income to surpass Wall Street consensus expectations. This positive outlook is largely attributed to anticipated customer growth. Similarly, Goldman Sachs (NYSE:GS) upgraded the company's stock rating from Neutral to Buy, following a year-over-year revenue growth of 18.54% and impressive gross profit margins of 85.24%.
Susquehanna analysts raised their price target on BILL Holdings shares to $100.00, up from the previous $91.00, while maintaining a Positive rating on the stock. This adjustment follows the company's commitment to achieving core revenue growth of over 20% in fiscal year 2026. Additionally, the company's inclusion in the S&P MidCap 400 index is a significant development, reflecting its recognition as a prominent player among mid-sized companies in the U.S. market.
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