KeyBanc Re-rated These Vertical Software, FinTech Stocks Based On Current Economic Backdrop: Read To Know

KeyBanc Re-rated These Vertical Software, FinTech Stocks Based On Current Economic Backdrop: Read To Know

KeyBanc analyst Josh Beck noted that rates on the 10-year fell below 1% before quickly expanding by ~2%, which coincided with a dramatic digital adoption surge, triggering a rapid rise and subsequent fall for high-growth, long-duration tech assets. 

He noticed rising capital costs may lead to a strategic re-evaluation towards what they refer to as "Lean Growth," a new era featuring a more balanced approach across growth and profitability, marking a pivot from a heavier growth bias (both organic and M&A) in prior years. 

He ran a profitability path deep dive assessing duration to 20% operating margins over ~3-4 years to better evaluate the implications of a Lean Growth era. He ran an analysis on net cash coverage (~20% of market cap). 

He also re-based his "LT rule of 40" DCF analysis (~50 on average) to contemplate higher rates (LDD WACC) and refined SBC-related expenses (mid-teens), which generally moves price targets lower across most of the group. 

As a result, he refreshed some of his preferred commerce/back office ideas into distinct categories across untapped platform potential (Bill.com Holdings, Inc BILLShopify Inc SHOP), execution-driven (Global-E Online Ltd GLBELightspeed Commerce Inc LSPD), and relatively defensive (AvidXchange Holdings, Inc AVDXEngageSmart, Inc ESMT) themes. 

Keybanc maintained Overweight on Bill.com and cut the price target to $150. He reiterated Overweight on Shopify and cut the PT to $50.

Beck maintained Overweight on Global E Online and raised the PT to $30, reiterated Overweight on Lightspeed Commerce, and cut the PT to $30.

Keybanc maintained Overweight on AvidXchange Holdings and cut the PT to $10 while reiterating Overweight on Engagesmart and cutting the PT to $20.

While retaining his positive bias on product leadership and management strategy, he downgraded Blend Labs, Inc BLND and VTEX VTEX to Sector Weight to reflect rate/inflationary headwinds across the mortgage and LATAM e-Com end markets. 

He also adjusted estimates for BTRS Holdings Inc BTRS, Blend Labs, and VTEX. 

Price Action: BLND shares traded higher by 6.57% at $2.88 on the last check Thursday.

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