Cloud based bill payment company Paymentus Holdings PAY saw shares fall after reporting second-quarter financial results after the market close Wednesday.
Analysts are sizing up the company’s guidance and contract delays.
The Paymentus Analysts: Goldman Sachs analyst Will Nance downgraded Paymentus from Buy to Neutral and lowered the price target from $19 to $16.
Raymond James analyst John Davis has an Outperform 2 rating and lowered the price target from $23 to $20.
Wells Fargo analyst Jeff Cantwell has an Overweight ratting and lowered the price target from $20 to $19.
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The Paymentus Takeaways: Nance downgraded Paymentus shares on uncertainty over the company’s operating margins.
“We think investors are likely to be skeptical about the company’s ability to deliver more than the guided 450bps of sequential EBITDA margin improvement in 2H22, given Pay’s ability to pass through the network fee-related inflation with higher pricing network fees,” Nance said.
The analyst highlighted revenue growth and pipelines up 50% year-over-year as positives in the quarter.
“We continue to think PAY represents a compelling long-term story with high incremental margins and a solid value proposition for clients.”
Davis sees rollouts from larger clients hitting the company’s financials in the future.
“Excluding the delays, revenue could have been actually reaffirmed and barring another delay, we feel confident this could be the final cut to the 2022 top line,” Davis said.
The analyst points to adjusted EBITDA coming in below analyst targets and another pain point going forward. Davis sees it taking time to ramp up transactions going forward.
“We are sticking with the stock given the defensive nature of bill pay, momentum in client wins, JPM partnership, and likely acceleration in 2023, although admit patience will be needed.”
Cantwell said it was a surprise to see Paymentus Holdings guide 2022 revenue down due to contract delays. The analyst sees the news item from the company being received negatively by investors in the near term.
“Management indicated this was simply timing-related, but we expect this development will impact investor sentiment going forward,” Cantwell said.
The analyst also points to EBITDA generation in 2022 and 2023 “now more suspect to us.”
“We see Paymentus as having longer-term ability to expand adjusted EBITDA margins and drive greater profitability as it consolidates its leading position in bill payments.”
PAY Price Action: Paymentus shares are down 29.6% to $12.75 on Thursday versus a 52-week range of $11.57 to $35.
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