On Tuesday, Baird updated its outlook on Bill.com Holdings Inc. (NYSE: NYSE:BILL), raising the price target to $100 from the previous $74 while maintaining a Neutral rating on the stock. Currently trading at $89.52 and near its 52-week high, InvestingPro analysis suggests the stock is fairly valued. The adjustment follows Bill.com's announcement of its plans to offer $1.0 billion of convertible senior notes due in 2030. The firm anticipates that this transaction could result in a $0.10 to $0.20 annualized earnings per share (EPS) headwind.
The proceeds from the offering are earmarked for several strategic financial maneuvers. With a strong balance sheet showing more cash than debt, Bill.com intends to repurchase its existing convertible notes, which have a remaining balance of $0.7 billion. These legacy notes carry a 0% interest rate and are currently valued below their conversion price, suggesting that they may be repurchased at a discount. Additionally, the company has allocated $0.2 billion for stock buybacks and plans to enter into a capped call transaction.
The analyst at Baird expressed a growing warmth towards Bill.com's stock, acknowledging the company's potential for revenue growth acceleration back to the 20% mark. The company's impressive 85.24% gross profit margin and current revenue growth of 18.54% support this optimistic outlook. The improved incremental margins and a renewed interest from the investment community in smaller, fast-growing fintech companies were also noted as positive factors.
Bill.com's strategic financial actions are part of its broader efforts to strengthen its balance sheet and position itself for future growth. The company's decision to issue convertible notes and repurchase existing debt reflects a proactive approach to managing its financial obligations while investing in its own stock, a move that often signals confidence in the company's prospects. InvestingPro subscribers can access 16 additional investment tips and a comprehensive Pro Research Report, offering deeper insights into Bill.com's financial health and growth trajectory.
In other recent news, Bill.com has demonstrated significant growth in its Q3 results, surpassing consensus expectations and marking the company's first instance of non-GAAP profitability. US Tiger Securities and Mizuho (NYSE:MFG) Securities have both raised their price targets for the company, citing robust financial results and the company's milestone achievement of non-GAAP profitability.
The company's revenues reached $358 million, surpassing the consensus estimate of $348 million and marking a 19% year-over-year core revenue increase. Additionally, Bill.com's management revised its revenue growth forecast for fiscal year 2025, now expecting a 12-13% increase year-over-year.
The company's platform now serves over 475,000 businesses, handling $80 billion in payment volume, a testament to its growth trajectory and market leadership. In response to these developments, Bill.com repurchased 3.7 million shares worth $200 million as part of a $300 million authorization. Analysts from Mizuho have acknowledged the company's potential for growth but maintain a cautious outlook on its current valuation and future performance.
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