Analyst Names Alight As Top Pick, Anticipates Win In Both Strong And Challenging Economy

  • Needham analyst Kyle Peterson reiterates Alight Inc ALIT with a Buy and a $13 price target.
  • ALIT's recent guidance calls for accelerating revenue growth, with Peterson's model projecting 11% growth in FY23, up from 7.4% in FY22. 
  • The analyst believes that this acceleration in growth is due to BPaaS adoption accelerating, which is helping improve cross-selling efforts in emerging areas like leave management and earned wage access. 
  • Also, ALIT had ~$2.9 billion in revenue under contract entering FY23, a record level that provides a solid base to start the year. 
  • The analyst believes that other FY23 deals should help ALIT meet or exceed the $3.47 billion -$3.51 billion revenue guidance.
  • ALIT recently completed a 52.9 million share secondary offering in a deal priced at $9 per share. 
  • The analyst estimate that the deal brings Blackstone Inc BX & Affiliate's pro forma ownership down to ~22%. 
  • ALIT repurchased 1.148 million shares from the selling shareholders in privately negotiated transactions which should help reduce the private equity overhang on the stock, and improve secondary market trading liquidity, while also returning capital to shareholders by repurchasing shares as part of the transaction.
  • ALIT is Needham's Top Pick for 2023. Peterson believes that ALIT will likely thrive in both a strong and challenging economy, with ALIT's mission-critical HR services and commitment to efficiency serving as a backbone to help growth and margins continue to improve for the next several years. 
  • Price Action: ALIT shares traded lower by 1.81% at $8.70 on the last check Monday.
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