Updated Aug 13 at 5:03pm ET.
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Q2 reported that nine out of ten of its digital banking customers now use its Innovation Studio. This is a set of tools that lets banks build their own custom features or plug in third-party apps directly into the Q2 platform. This level of adoption is a strong sign of customer lock-in.
When a bank builds its own unique features on top of Q2's software, it becomes much harder and more expensive to switch to a competitor. For a company that relies on long-term contracts, this deep integration makes the future stream of cash from these banks more predictable and secure.
Source: Business Wire
UBS raised its target price from $63 to $68, suggesting the stock has room to rise from its current level. This move comes after the company reported quarterly results that showed steady growth in its banking software business. While the firm kept its neutral rating, the higher target reflects more confidence in the company's ability to grow its profits as it signs more banks to its platform.
Source: UBS
The company reported a strong second quarter, with revenue rising 13 percent to about $220 million. More importantly, its GAAP net income, the actual profit left after all expenses, jumped to nearly $30 million, more than double what it earned in the same period last year. This shows the business is becoming much more efficient as it grows, as it can add new revenue without its costs rising nearly as fast.
Management also announced a new $350 million share repurchase program. This is a move where a company uses its extra cash to buy its own stock, which reduces the total number of shares and makes each remaining share own a larger piece of the business. For a company that only recently became consistently profitable, this is a clear signal that they believe they are now generating more cash than they need to run the day-to-day business.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Analysts have recently adjusted their outlooks following the company's latest earnings report. Most analysts, 24 out of 32, rate the stock a buy, and the average target price of $70 suggests a 6% gain from today's price.
The company has a consistent habit of clearing the bars set by analysts, having beaten profit expectations in most of the last two years.
| Expectation | |
|---|---|
| EPS | $0.70 |
| Revenue | $221M |
Business Wire · Press release · Aug 6
Seeking Alpha · Opinion · Jul 29
Business Wire · Press release · Jul 29
Seeking Alpha · Opinion · Jul 17
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