On Thursday, BofA Securities adjusted its outlook on E2open Parent Holdings (NYSE:EOPN) shares, reducing the price target from $4.50 to $3.75, while maintaining an Underperform rating on the company's stock. The revision follows E2open's announcement of a decrease in Subscription SaaS revenue for the second quarter of fiscal year 2025, which ended in August, reporting a year-over-year drop of 2.3% to $131.6 million.
Although this figure slightly exceeded the consensus estimate of $130.3 million and fell within the company's previously issued guidance range of $129-132 million, concerns have been raised due to a downward revision in the full-year SaaS guidance.
E2open's management has reduced the midpoint of its fiscal year 2025 SaaS guidance by $8 million, or 1.5%, now setting the target between $526 million and $532 million. This adjustment is attributed to continued delays in securing large deals across various industries. The concerns regarding these risks were previously noted by BofA Securities in a rating change note on October 2.
The firm has recalibrated its price objective for E2open, applying a 9 times multiple to its calendar year 2025 estimated EBITDA, down from the prior multiple of 10 times. This adjustment reflects a discount compared to the 26 times average multiple of the company's peers. The rationale behind the discount includes the company's declining revenue and a higher financial leverage, suggesting that the market should value E2open's shares more conservatively.
The updated price target and the reiterated Underperform rating indicate BofA Securities' cautious stance on E2open's financial prospects amid the current challenges in deal signings and revenue generation within the supply chain software sector.
In other recent news, E2open Parent Holdings reported mixed results in its recent earnings report. Subscription revenue reached $131 million, and Adjusted EBITDA was at $55 million, in line with Loop Capital's expectations. However, the company missed total revenue projections by $4 million.
E2open has adjusted its total revenue forecast for FY25 downward by $26 million due to challenges in bookings and professional services. Despite these setbacks, E2open's management remains optimistic about improving retention rates and revitalizing the sales structure.
In the latest developments, E2open reported a slight decline in subscription revenue year-over-year to $131.6 million but saw an increase in quarterly subscription bookings. Total revenue was down 4% at $152.2 million, with professional services revenue falling by 13.1% to $20.6 million. Looking ahead, E2open's management anticipates an improvement in services revenue in the second half of FY 2025, projecting Q3 subscription revenue to be between $130 million and $133 million.
Loop Capital maintains a Hold rating on E2open shares, expressing caution due to the company's recent performance. The firm believes that while there could be potential improvement as FY25 progresses, the immediate quarters may not yield encouraging results. Management at E2open, however, is confident in their strategy and anticipates net booking and revenue growth as retention rates improve and bookings rise.
InvestingPro Insights
Recent data from InvestingPro provides additional context to E2open Parent Holdings' financial situation. The company's market capitalization stands at $1.38 billion, reflecting its current market valuation. E2open's revenue for the last twelve months as of Q1 2025 was $625.6 million, with a concerning revenue growth rate of -4.04% over the same period. This aligns with the article's mention of decreased Subscription SaaS revenue and the company's downward revision of full-year SaaS guidance.
InvestingPro Tips highlight that E2open is not profitable over the last twelve months, which is consistent with the company's operating income of -$47.98 million for the same period. This unprofitability underscores the challenges mentioned in the article regarding delayed large deals and declining revenue. However, it is worth noting that analysts predict the company will be profitable this year, suggesting potential for improvement despite current headwinds.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for E2open Parent Holdings, providing deeper insights into the company's financial health and market position.
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