SunTrust Moves To Sidelines On Q2 Holdings After 56% Run In 2018

Q2 Holdings Inc QTWO shares have been on a tear over the past year, sending an analyst at SunTrust Robinson Humphrey to the sidelines.

The Analyst

Analyst Terry Tillman downgraded shares of Q2 Holdings from Buy to Hold and maintained a $60 price target.

The Thesis

Q2 Holdings shares have performed strongly both year-to-date as well as over the last year, Tillman said in a Monday note. The stock gained an incremental 10 percent following its May 2 first-quarter results, the analyst said. 

The company is a cloud-based provider of digital banking solutions to regional and community financial institutions.

The run-up in share price — along with modest upward revisions SunTrust made to its estimates — have rendered the stock's risk-reward more balanced, Tillman said. 

Tax reform, improving interest rates and an anticipated improved regulatory environment for Q2's customers and prospects are driving strong bookings, the analyst said, citing the company.

"With renewed strength in Tier 1 wins and balanced strength of bookings in all segments of the business, we anticipate revenue growth will re-accelerate into 2019," Tillman said. 

The next notable catalysts may not occur until the fourth-quarter selling season, he said. 

SunTrust indicated it will revisit its rating as visibility into the degree of growth acceleration improves or in the event of market-driven weakness or volatility.

The Price Action

Q2 Holdings shares have soared about 56 percent year-to-date.

The stock was down 0.52 percent at $57.20 at the time of publication Monday afternoon. 

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