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B.Riley cuts Iteris shares target, cites revenue and margin disparities

EditorEmilio Ghigini
Published 06/14/2024, 08:06 PM
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On Friday, B.Riley adjusted the price target for Iteris , Inc (NASDAQ: NASDAQ:ITI) shares to $8.00, down from the previous $8.50, while maintaining a Buy rating on the stock. The firm's decision followed Iteris's announcement of its fiscal fourth-quarter results after the market closed on Thursday, which showcased mixed financial performance.

Iteris reported a slight revenue increase of 0.7% year-over-year, reaching $42.8 million, surpassing both B.Riley's and the consensus estimates of $41.8 million and $42.5 million, respectively. However, the company's adjusted earnings before interest, taxes, depreciation, and amortization (AEBITDA) fell short at $2.8 million compared to the anticipated $3.1 million consensus.

The company experienced contrasting trends within its segments, with a 13.9% decrease in product sales and a 21.8% increase in service revenues. Iteris highlighted the stabilization of its supply chain and improvements in engineering labor.

Notably, recurring revenue made up approximately 25% of the total revenue for fiscal year 2024, with a significant portion coming from software as a service (SaaS), data as a service (DaaS), platform as a service (PaaS), and managed services.

Iteris also reported a gross margin of 37.4%, which was higher than B.Riley's estimate but below the consensus. The company's backlog increased by 8% to $123.8 million, with net bookings rising 20% to a record $53.3 million. The company anticipates that around 32% of these bookings will contribute to annual recurring revenue, marking a 32% year-over-year increase.

The partnership with Sumitomo Electric Industries, announced by Iteris, is expected to double the company's total addressable market for detection solutions to approximately $1 billion.

B.Riley highlighted the solid demand and the potential for revenue growth and margin expansion in the coming years as positive indicators for Iteris. Despite lowering the price target, the firm reiterated its confidence in the stock with a Buy rating.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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