On Tuesday, UBS has raised the price target for MeridianLink (NYSE: MLNK) to $17.50, up from the previous target of $16.00, while keeping a Sell rating on the stock. The adjustment comes as MeridianLink provided an update on its financial expectations for the fourth quarter of 2023.
MeridianLink has announced anticipated fourth-quarter revenue to be between $73.5 million and $74.5 million, which aligns with the earlier guidance range of $73 million to $77 million. However, this forecast falls short by $1 million from the midpoint target of $75 million. Alongside the revenue outlook, the company also expects adjusted EBITDA to reach between $30 million and $31 million for the same period.
This adjusted EBITDA projection suggests a margin of approximately 41% at the midpoint, which is significantly higher by about 900 basis points compared to the margin implied by the previous guidance of 32%. Additionally, this represents an improvement of roughly 850 basis points year-over-year.
“While we are encouraged to see MeridianLink’s EBITDA margin above 40% for the first time since Q1 2022, we want to better understand the demand environment and nature of the Q4 EBITDA margin outperformance before we anticipate sentiment becoming more positive,” said UBS.
Following UBS’s updated price target for MeridianLink, the market has responded with a mix of indicators. According to InvestingPro data, MeridianLink’s market capitalization currently stands at $1.44 billion USD. Despite the cautious stance by UBS, the company’s revenue growth has been steady, with a 6.42% increase over the last twelve months as of Q3 2023. This is further reinforced by a slight quarterly uptick of 6.6% in Q3 2023.
However, the company’s profitability metrics present a more nuanced picture. The P/E Ratio (Adjusted) for the last twelve months as of Q3 2023 is notably negative at -100.48, reflecting the challenges MeridianLink faces in achieving profitability. This is in line with one of the InvestingPro Tips that highlights the company’s lack of profitability over the last twelve months. Nonetheless, analysts predict the company will be profitable this year, which could signal a turning point for the firm.
Another InvestingPro Tip suggests that MeridianLink’s stock is currently in oversold territory according to the RSI, which may interest potential investors looking for entry points. It’s worth noting that there are 8 additional InvestingPro Tips available, which could provide further insights into MeridianLink’s performance and outlook. Subscribers can access these tips and more detailed analytics by visiting InvestingPro at https://www.investing.com/pro/MLNK and using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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