Asure Software’s shares took a hit, falling 21% recently, despite reporting robust third-quarter results. The stock is currently sitting at $6.76, down approximately 27% for the year.
Strong Revenue Growth and Improved Margins
Asure Software witnessed a remarkable 34% increase in revenue during the third quarter. Additionally, the company managed to narrow its net loss per share to just 10 cents. These positive results can be attributed to significant gains in gross margins. Furthermore, their newly launched offering, which combines their 401(k) product with payroll services, gained a favorable response from customers.
Guidance Reflects Economic Uncertainty
However, Asure Software’s guidance for the future takes into account the current economic uncertainty. With inflationary trends, a potential recession, and recent measures by the Internal Revenue Service against fraudulent employee retention tax credit claims, the company expects a high level of economic uncertainty in 2023 and possibly extending into 2024. As a result, Asure Software predicts revenue in the range of $25 million to $27 million for the fourth quarter and $125 million to $129 million for fiscal year 2024.
Lake Street Capital has downgraded Asure Software to a hold rating from buy. On the other hand, Stifel continues to maintain its buy rating but has revised its price target to $12 from $15. In their evaluation, Stifel considers Asure Software’s fiscal 2024 guidance, accounting for approximately $10 million to $15 million of inorganic growth from acquisitions. However, due to uncertainties regarding the timing of this growth, Stifel has decided to exclude it from their model. They still believe that Asure is positioned well to benefit from tailwinds facilitated by Compliance/Market-Place/Secure Act 2.0.
For more information, contact Josh Beckerman.