On Monday, BMO Capital Markets adjusted its outlook on i3 Verticals (NASDAQ:IIIV) shares, a payment processing and software solutions company. The firm's analyst has reduced the price target for i3 Verticals to $24.00 from the previous $25.00 while maintaining a Market Perform rating on the stock.
The adjustment follows i3 Verticals' fiscal second quarter 2024 results, which slightly fell short of expectations. Additionally, the company has revised its full-year 2024 guidance downward for the second consecutive quarter. In light of these developments, the analyst has trimmed forward EBITDA estimates by 3-5%.
Despite the earnings miss, i3 Verticals continues to explore the sale of its Merchant Services business. This potential divestiture has been a point of interest for investors, many of whom had anticipated an announcement regarding the sale as early as this quarter.
The analyst noted that while the sale of the Merchant Services division is likely to be positively received by the market, transforming i3 Verticals into a more software-centric business with minimal leverage, there are concerns about the time it may take to secure a buyer. As such, the expected positive re-rating of the company's stock could take longer to materialize than initially expected.
InvestingPro Insights
As investors consider the implications of BMO Capital Markets' revised outlook on i3 Verticals, it's instructive to look at the company through the lens of InvestingPro metrics and tips. The real-time data indicates a market capitalization of $671.12 million, with a notably high P/E ratio of 604.81, suggesting that investors have high expectations for future earnings growth. However, the adjusted P/E ratio for the last twelve months as of Q2 2024 stands at a more moderate 55.27. The company's revenue has grown by 9.02% over the same period, reflecting a steady upward trajectory in its financial performance.
Among the InvestingPro Tips, two key insights stand out. Firstly, net income is expected to grow this year, which aligns with the long-term strategic shift towards a software-centric business model. Secondly, the stock's recent price movement has entered oversold territory according to the Relative Strength Index (RSI), potentially indicating a buying opportunity for contrarian investors. It's worth noting that the stock has experienced significant volatility, with a 10.77% drop in the past week alone.
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