On Thursday, Needham maintained a Buy rating on Alkami Technology Inc (NASDAQ: ALKT) and raised the shares target to $32 from $30, following the company's first-quarter results for 2024. Alkami's performance exceeded expectations with significant growth in subscription revenue and gross margin, as well as a robust expansion in EBITDA margin.
Alkami Technology reported a 27% year-over-year increase in subscription revenue and a gross margin expansion of approximately 360 basis points. The company's EBITDA margin saw even stronger growth.
These financial achievements were underscored by the addition of six new clients and the implementation of eight clients during the quarter. Consequently, Alkami's total user base grew to 18.1 million, marking a 19.8% increase from the previous year.
The company's management team has provided a positive outlook for the second quarter and has upgraded the forecast for the full fiscal year 2024. This optimism is based on robust sales execution and favorable market conditions. Needham's analyst highlighted that with the stock trading at an enterprise value to FY25 revenue multiple of approximately 5.5 times, the risk-reward balance is considered attractive.
Needham's endorsement of Alkami as a top pick for 2024 is reinforced by the company's raised growth outlook, which is now reflected in the increased price target. Alkami Technology's strong quarterly results and positive guidance appear to position it well for continued success in the market.
InvestingPro Insights
Alkami Technology Inc (NASDAQ: ALKT) has shown a remarkable high return over the last year with a 121.62% price total return, which is a strong indicator of investor confidence and market performance. The company's liquid assets also exceed its short-term obligations, providing a cushion for operational flexibility. This is particularly important given that analysts predict Alkami will transition to profitability this year, a significant milestone for the company.
Investors should note that Alkami currently trades at a high revenue valuation multiple (Price/Book LTM as of Q1 2024: 7.37) and a high Price/Book multiple, suggesting a premium market valuation relative to its book value and revenue. This could be reflective of the market's optimism about the company's future growth prospects, as highlighted by its recent positive quarterly performance. With a market capitalization of $2.38 billion and a robust revenue growth of 28.01% in the last twelve months as of Q1 2024, Alkami's financials are indicative of a company on the upswing, despite not being profitable over the last twelve months.
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