Bill.com Holdings (BILL) provides small and medium businesses (SMBs) with cloud-based software products to automate their entire payment system.
The payments software firm recorded good profitability for the second quarter. Both the top and bottom lines outperformed expectations. In addition, both Subscription and Transaction fees climbed, by 51% and 121% year-over-year, respectively, excluding the impact of the Divvy and Invoice2go acquisitions. In addition, overall payment volumes increased by 62% year-over-year to $56.4 billion.
The increased acceptance of its platform, development of its e-payment solutions, and secular market trends should assure Bill.com’s consistent growth in 2022.
What’s Ahead?
Bill.com is in a great position to profit from SMBs’ increasing acceptance of digital payments. Last year, the firm purchased Divvy, a spend management firm, to help SMBs manage their cash flows. Then in September, it purchased a mobile-first accounts receivable (AR) software firm Invoice2go for $625 million. Both of these purchases should help SMBs streamline their business operations while also contributing to the company’s top-line growth.
Furthermore, Bill.com’s strategic collaborations with major financial institutions provide a huge opportunity for the firm to target commercial clients, which should expand the company’s top-line growth.
The company forecasted a strong third-quarter performance based on the aforementioned growth factors. It predicts sales of $157-$158 million, which is higher than the $141 million average estimates. Furthermore, an adjusted loss of $0.16 to $0.15 is projected, which is below the consensus loss of $0.22.
Analysts’ Positive Comments
Reviewing Bill.com’s performance and forward prospects, most of the analysts are quite impressed and have given the company a Buy rating.
One analyst, Scott Berg of Needham, believes that a substantial TAM (total addressable market) of SMBs, as well as the recent Divvy and Invoice2Go acquisitions, will boost Bill.com’s product portfolio and competitive position.
Another analyst, Bhavan Suri from William Blair, is bullish on Bill.com, as it is “unique in the SMB market as the only unified end-to-end platform with accounts receivable and accounts payable as well as integrated payments solutions.” Suri sees strong growth ahead for the company, as B2B payments’ transformation to digital is still in its early years.
Only One Analyst Stays Out
Given the market’s ongoing volatility, only one analyst, Peter Levine of Evercore ISI, prefers to remain on the sidelines following Q2 earnings results. Levine is especially concerned about the volatility of companies with high valuations; Bill.com has a valuation of $23.76 billion.
Nonetheless, Levine is optimistic about the company’s long-term prospects, citing the company’s ability “to expand internationally,” great opportunities in the “payments” space, and a huge SMB client base.
The analyst rated the stock Neutral and also decreased the price target to $200.00 from $300.00.
Wall Street’s Take
On TipRanks, Bill.com commands a Strong Buy consensus rating, based on 9 Buys and 1 Hold. As for the price target, the average BILL price target of $279.40 implies 20.6% upside potential to current levels.
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