On Wednesday, RBC Capital adjusted its price target for PowerSchool Holdings Inc. (NYSE:PWSC) shares, a leading provider of K-12 education technology solutions, reducing it to $22.00 from the previous $27.00. Despite the decrease, the firm maintains an Outperform rating on the company's stock.
The revision reflects a response to the company's performance in the recent quarter, where PowerSchool showcased consistent results. The company's Annual Recurring Revenue (ARR) exceeded expectations, and there was notable margin expansion.
These positive outcomes were attributed to successful cross-selling strategies, the acquisition of new logos, and the momentum from securing large deals.
PowerSchool's initial foray into artificial intelligence (AI) has also been promising. Since the introduction of two AI-powered products in April, the company has closed deals worth approximately $400,000 and has built a substantial pipeline nearing $10 million.
The integration of AI capabilities across PowerSchool's product portfolio is expected to provide a significant opportunity for the company.
RBC Capital expressed optimism about PowerSchool's positioning, suggesting that the integration of AI could positively impact the company's financial estimates sooner than previously anticipated.
The decision to lower the price target to $22 is based on a contraction in the peer group multiples, which affects the valuation of companies within the sector.
InvestingPro Insights
InvestingPro data presents a mixed picture for PowerSchool Holdings Inc. (NYSE:PWSC), with a market capitalization of $3.38 billion and a notable revenue growth of 10.62% over the last twelve months as of Q4 2023. Despite the growth, the company's P/E ratio stands at -86.07, reflecting market skepticism about its earnings potential. The gross profit margin is healthy at 68.93%, indicating strong operational efficiency.
Among the InvestingPro Tips, two particularly stand out for PowerSchool. Firstly, analysts expect net income growth this year, which could be a positive signal for investors looking for future profitability. Secondly, the stock is currently trading near its 52-week low, which, combined with an RSI suggesting the stock is in oversold territory, might interest value-seeking investors.
For those considering a deeper dive into PowerSchool's financials and future prospects, InvestingPro offers additional tips that could guide investment decisions. With the use of coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, accessing a wealth of insights that could help in making more informed investment choices. There are 10 more InvestingPro Tips available, which could further enrich your understanding of PowerSchool's potential and risks.
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