Mitek Systems target cut by H.C. Wainwright, retains Buy rating By Investing.com

H.C. Wainwright has adjusted its outlook for Mitek Systems (NASDAQ: NASDAQ:), reducing the price target to $11 from the previous $19, while maintaining a Buy rating on the stock.

The adjustment follows a significant 25.4% drop in the company’s shares on Friday, a day when the index saw only a modest 0.2% decline. This sharp fall in Mitek’s stock value came in response to the company’s lower-than-expected financial guidance issued along with its third fiscal quarter of 2024 results.

The company’s revenue for the third fiscal quarter was reported at $45.0 million, slightly missing the $47.0 million anticipated by H.C. Wainwright and the $48.0 million consensus estimate. More concerning to investors was the downward revision of the full-year revenue forecast, now set at $169.0 million to $173.0 million, a decrease from the previously projected range of $180.0 million to $185.0 million.

The lowered guidance is attributed to setbacks in Mitek’s Identity segment, which experienced delays in large deals, either being pushed to 2025 or removed from the pipeline altogether.

The Identity segment’s struggles have led to the expectation that it will not achieve breakeven in the fourth fiscal quarter of 2024, as previously hoped. Furthermore, the segment’s path to profitability in the fiscal year 2025 is now viewed as unlikely, which is anticipated to impact the company’s overall operating income and EBITDA margins.

Despite the current challenges, Mitek has been actively purchasing its own shares, investing $16.0 million back into the company through a share repurchase program initiated earlier in the year. This buyback activity is expected to continue, providing a level of downside protection for the stock.

Mitek Systems, Inc. reported a 4% year-over-year increase in Q3 revenue, reaching $45 million, despite facing challenges in its Identity product segment. The company’s growth was primarily driven by its Mobile Deposit franchise and Check Fraud Defender product, with deposit revenue growing by 18%. The Identity product portfolio, however, saw a 14% decline in revenue. Consequently, Mitek adjusted its fiscal 2024 revenue outlook to a range of $169 million to $173 million.

The company also announced its ongoing search for a new CEO and provided revised fiscal 2024 revenue and margin outlooks, expecting resumed growth in fiscal Q2 2025. Furthermore, Mitek anticipates revenue growth to resume in fiscal Q2 2025, led by its diverse product offerings. The company plans to introduce revenue and operating target ranges for fiscal 2025 in the next earnings call.

InvestingPro Insights

Amidst the recent turbulence for Mitek Systems, investors are seeking clarity on the company’s financial health and future prospects. According to InvestingPro, Mitek’s market capitalization stands at approximately $394 million, reflecting investor sentiment and market conditions. Despite the stock’s recent plunge, InvestingPro Tips suggest that Mitek is expected to see net income growth this year, and it boasts impressive gross profit margins of 85.28% for the last twelve months as of Q3 2024. This margin is indicative of the company’s ability to manage its cost of goods sold effectively, which is a positive sign for potential investors.

InvestingPro Tips also indicate that Mitek’s stock is currently in oversold territory according to the Relative Strength Index (RSI), hinting at a potential rebound or at least stabilization in the near term. However, it’s important to note that three analysts have revised their earnings downwards for the upcoming period, which may need to be factored into investment decisions. For those considering a deeper dive into Mitek’s financials and future outlook, there are additional tips available on InvestingPro, providing a comprehensive analysis that could guide investment strategies.

The data also reveals that Mitek is trading at a P/E ratio of -77.71, which could be concerning as it suggests the company is not currently profitable. With the next earnings date set for October 31, 2024, investors will be watching closely for signs of recovery or further adjustments to the company’s financial trajectory. Mitek’s fair value, as per analyst targets, is currently estimated at $15, while InvestingPro’s fair value assessment is slightly lower at $11.37, offering different perspectives on the stock’s potential value.

For those interested in exploring these metrics further and uncovering additional insights, InvestingPro has numerous tips that could help in evaluating Mitek’s investment potential in light of recent developments.

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