Bill.com Holdings, Inc. (NYSE:BILL) shares are down nearly 50% since the start of the year on a combination of higher yields and Q3 results that were below buy-side expectations.
Analysts at Berenberg Bank lowered their price target on the company’s shares to $125 from $340, emphasizing that transaction revenue may be impacted in a downturn.
According to the analysts, a large percentage of the company’s revenue is transaction driven, now comprising 68% of revenue (vs. 31% in 2019). Further, growth is becoming more dependent on this revenue stream, which was up 286% in Q3/22 (vs. 78% for subscriptions). Recent acquisitions are also driving the greater mix with Divvy and Invoice2go transactions accounting for 86% of revenue.
Historically, management has had less visibility in this business and while the company has managed its outlook conservatively, the analysts believe the market is expecting TPV to grow more than the 3% sequential growth currently baked in by consensus expectations.
According to the analysts, risks not only include tougher year-over-year comps, but the added potential that the company’s customers could slow activity in the near to medium term.