Shares of AgileThought continued to fall Tuesday, a day after analysts at Oppenheimer slashed the company’s price target in response to the company’s first-quarter results.
In a note published Monday, the firm lowered its price target to $2.50 from $7 but still maintained its Buy rating. The software consulting firm saw its stock lose more than a third of its value Friday after it delivered earnings and revenue that both missed expectations.
However, despite the significant target reduction, Oppenheimer argued there's still value to be found.
“Operationally, AGIL continues to execute, in our view,” the analysts said. “The company has increased sales capacity over recent months by nearly 50%, posted more logo wins, and increased gross margins in Q1, all underscored by its differentiated Mexico delivery model.”
What spooks investors is balance sheet debt, which the analysts acknowledged is a “material short-term overhang.” AgileThought recently entered a forbearance agreement with its lender and has breached covenants in the past, the firm noted.
But that doesn’t mean its current valuation isn’t too low in their view.
“Given the good operational performance of the business, we believe that AgileThought will come out the other side here, analysts said. “… [T]he current valuation at approximately 0.6x EV/Sales seems to have built in more than a worst-case scenario, in our view.”
Looking ahead, the analysts expect a “steady number of new logo wins and increased wallet share in 2023 and beyond.” To that end, AgileThought signed four new logos in the first quarter, which Oppenheimer believes can turn into multimillion-dollar revenue opportunities.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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