On Tuesday, Rimini Street (NASDAQ:RMNI) shares, currently trading at $2.62 with a market capitalization of $238 million, received an upgrade from a Craig-Hallum analyst, moving from Hold to Buy, along with a new price target of $6.00.
The stock has already shown strong momentum, gaining over 24% in the past week. The upgrade follows a favorable Appeals Court ruling, which reversed many of the previous district court's decisions against RMNI in its legal battle with Oracle (NYSE:ORCL).
The Appeals Court's decision vacated the district court's opinion that had significantly ruled against Rimini Street, including requirements to end support of certain software environments and delete client data.
The reversal of these rulings has positive implications for Rimini Street's appeal for a refund of the $58.5M in legal fees paid to Oracle, and suggests that Rimini Street may continue servicing certain software environments, contrary to the earlier court order.
The analyst highlighted that while some areas of the case may still result in rulings against RMNI, such as the use of automated tools, these potential restrictions are seen as narrower and more manageable. This development is perceived as reducing the legal headwinds for Rimini Street, allowing the company to focus on its business model and growth.
Despite previous legal challenges, Rimini Street demonstrated a strong financial quarter on October 31, 2024, with an increase in Annual Recurring Revenue (ARR), billings, and clients, as well as an uptick in retention rates. The company maintains healthy gross margins of 60.17% and generates $40.87 million in EBITDA.
The analyst pointed out the exceptional value proposition of Rimini Street's products and its competitive dominance in third-party support. According to InvestingPro, the company shows several promising indicators, with 8+ additional exclusive insights available to subscribers. The comprehensive Pro Research Report offers detailed analysis of RMNI's competitive position and growth prospects.
The new price target of $6.00 reflects a valuation of 1.5 times Revenue and 12.2 times EBITDA, while the company currently trades at just 4.94x EV/EBITDA. InvestingPro analysis indicates the stock is currently undervalued based on its proprietary Fair Value model.
The analyst's outlook suggests a substantial undervaluation of Rimini Street's stock, considering its strong underlying momentum and recent cost reductions, even with conservative estimates that had previously assumed a 10% decline in growth.
In other recent news, Rimini Street, Inc. continues to navigate through a series of significant developments. The company recently faced a decision from the United States Court of Appeals for the Ninth Circuit regarding a longstanding legal matter. This development is part of the ongoing litigation known as Rimini II, originating from the United States District Court for the District of Nevada.
In addition to this legal challenge, Rimini Street has reported mixed financial results for the third quarter of 2024. The company's revenue decreased slightly to $104.7 million, marking a 2.6% decrease year-over-year, and it reported a net loss of $43.1 million. Despite these challenges, Rimini Street has shown proactive growth strategies, including establishing a strategic partnership with ServiceNow (NYSE:NOW) and extending support for VMware (NYSE:VMW).
Furthermore, Rimini Street is implementing a cost optimization plan aiming for $35 million in annual reductions. However, due to the ongoing litigation, the company has suspended future financial guidance. These recent developments underscore Rimini Street's efforts to adapt its business model and offerings amid challenging circumstances.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.