Analysts Cut Price Targets On Payment Volume And SMB Softness Post Mixed Q2 Performance

Keybanc analyst Josh Beck maintained Holdings Inc BILL with an Overweight and lowered the price target from $130 to $125.

While the Q2 report was mixed across several closely watched KPIs, the analyst remains convinced that BILL is poised to gain a substantial share in the B2B space. leveraged a unique distribution strategy tied to accountants and FI partners with a rising take rate via a rising virtual and x-border mix alongside other opportunities linked to a growing financial software suite. 

The analyst trimmed TPV estimates conservatively, factoring in a further deterioration of trends, which prompted a lower price target to better factor in SMB macro risks. 

BMO Capital analyst Daniel Jester downgraded from Outperform to Market Perform and lowered the price target from $158 to $128.

The analyst moved to the sidelines following a tough fiscal Q2. BILL showed a deceleration in the core business, which exceeded the analyst anticipates as SMBs slowed spending. 

While the updated guidance now bakes in gradual deceleration for the next few quarters, especially for TPV, the analyst was concerned about the trajectory into next year, where consensus growth estimates now look high. 

With medium-term concerns about the competitive environment percolating, the analyst anticipates the shares could be rangebound until clarity emerges on the growth trajectory into FY24. 

Needham analyst Scott Berg reiterated a Buy and a $200 price target.

Bill's Q2 will read cyclical macro slowing TPV growth, feeding into the bear story to drive shares lower. 

The analyst believes long-term trends are intact, and long-term investors should aggressively buy BILL shares as the dust settles on the significant weakness likely today. 

Though growth in TPV volumes and transaction growth have weakened in the current macro, underlying trends on FI customer adoption and Divvy growth suggest BILL's GTM strategy is resonating well outside the smallest of customer segments.

The analyst finds it well-positioned to continue to take share as macro pressures subside. 

Morgan Stanley analyst Keith Weiss maintained an Overweight and lowered the price target from $200 to $185.

Weiss highlighted that investor concerns around SMB exposure in a deteriorating macro environment proved warranted, with a softer spending environment driving total payment volume (TPV) growth deceleration.

While fundamental to building a solid long-term foundation, the management's focus on repeat transaction optimization (vs. take rate optimization) does not maximize the near-term opportunity. 

Given these headwinds and SMB likely to see further macro impacts in 1H23, the analyst expects BILL to be a challenging story for investors to stomach near term. 

The analyst expects investors to find incremental comfort in a more derisked outlook after digesting the impacts of near-term macro headwinds. 

Price Action: BILL shares traded lower by 24.50% at $97.37 on the last check Friday.

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