AvidXchange Holdings, Inc (NASDAQ:AVDX) shares are trading lower after Goldman Sachs analyst Will Nance downgraded the stock from Neutral to Sell and lowered its price target from $13 to $11.50.
The analyst said the downgrade is attributed to the stock’s significant price increase of approximately 31% since the third-quarter earnings report, which led to a perceived negative risk-reward balance.
Despite recognizing AVDX as a leader in B2B payment digitization for mid-market companies, Nance expressed concern over the stock trading roughly in line or above its higher growth competitor, BILL Holdings, Inc (NYSE:BILL), coupled with aggressive Street estimates expecting an acceleration in underlying growth rates.
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The analyst noted that AVDX’s recent revenue growth has been buoyed by substantial interest rate increases and contributions from its political advertising vertical, which will likely diminish in 2025.
Nance suggests that while B2B payments may see better volume trends, achieving current Street estimates would require this improvement. The analyst prefers BILL for exposure to potential market re-acceleration, citing limited upside to AVDX’s revenue trends over the next year and potential for multiple compression if revenue growth disappoints in 2025.
The analysis highlights concerns over AVDX’s underlying revenue trends, which have needed to be stronger than headline figures suggest due to the offsetting effect of interest income from customer funds.
Street estimates for 2025 appear aggressive, assuming an inflection in growth and monetization beyond what is considered realistic, given the current transaction growth deceleration and stable take rates, as per the analyst. Furthermore, the valuation risk/reward is viewed negatively compared to BILL, as AVDX trades at a similar or premium valuation despite lower customer growth and monetization potential.
Price Action: AVDX shares traded lower by 3.39% at $11.25 on the last check Monday.
Disclaimer:Â This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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