Q2 Holdings’ 1Q Sales Outlook Exceeds Street Estimates; Street Is Bullish

Q2 Holdings forecasted better-than-expected sales in the first quarter after sales topped the Street consensus in 4Q. Shares closed at $144.56 on Feb. 17, down 1.5%.

The cloud-based digital banking solutions provider’s adjusted revenues in the fourth quarter increased 23.7% year-over-year to $109.7 million and exceeded the consensus score of $106.43 million. Meanwhile, adjusted earnings dropped 94.7% to $0.02 per share and missed the Street’s estimates of $0.05 per share.

Q2 Holdings’ (QTWO) adjusted gross margin was 48.3%, down from 56.8% year-over-year. Adjusted EBITDA came in at $6.1 million, down 42.5%.

Q2 Holdings CEO Matt Flake said, “In 2020, we demonstrated the resiliency and flexibility of our business, and we believe the strength of our pipeline and product portfolio position us for continued success in 2021.”

For 2021, the company projects adjusted revenue to be in a range of $488 million to $491 million, versus analysts’ expectations of $488.8 million. Adjusted EBITDA is expected to be between $34.5 million and $36.5 million.

For the first quarter of 2021, revenue is expected to generate between $114.6 million and $116.1 million, versus the consensus estimate of $111.9 million. Adjusted EBITDA is forecasted at $8.5 million-$9.1 million. (See Q2 Holdings stock analysis on TipRanks)

On Feb. 12, Robert W. Baird analyst Joseph Vruwink increased the stock’s price target to $160 (10.7% upside potential) from $125 and reiterated a Buy rating. The analyst cited, “While expectations have certainly risen for QTWO, we remain positive on the mid-term opportunity given multiple tailwinds: accelerating digital transformation efforts, financial institutions looking for guidance from their digital banking providers, cross-sell momentum, growing contributions from digital lending (should be accretive to company’s digital banking growth profile).”

Shares have rallied almost 50% over the past six months, while Wall Street analysts are still bullish about the stock. The Strong Buy consensus rating boasts 3 Buy ratings versus 1 Hold rating. Looking ahead, the average analyst price target stands at $142.67, putting the downside potential at 1.3% over the next 12 months.

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