Last Update 06 Dec 25

ALIT: Expanding Backlog Will Drive Future Margin Expansion And Share Upside

Analysts have trimmed their price target on Alight to $8.50 from $11.00, citing a delayed growth acceleration and a lower valuation multiple, even as the company’s backlog expands and management remains confident in margin improvement.

Analyst Commentary

Bullish analysts highlight that the revised price target still embeds upside from current levels, reflecting confidence that Alight can execute on its longer term growth and profitability agenda despite near term headwinds.

They point to the company’s expanding backlog as a visible indicator of demand that should translate into revenue growth once implementation cycles normalize and clients ramp onto the platform.

At the same time, some bearish analysts view the cut in the valuation multiple as a signal that the market is reassessing Alight’s near term execution risk and the timing of its growth inflection.

These more cautious views emphasize that while the company’s strategy remains intact, investors may need to see clearer evidence of accelerating revenue and sustained margin expansion before the shares can re rate meaningfully.

Bullish Takeaways

Bullish analysts see the growing backlog as a strong leading indicator of future revenue, supporting the case for durable mid term growth once delayed projects convert.
Management’s reiterated confidence in margin expansion is viewed as a key catalyst for earnings leverage and potential multiple stabilization over time.
The lower valuation multiple is seen by some as creating a more attractive entry point, with risk and reward skewed favorably if execution improves.
Ongoing client wins and renewals underpin the thesis that Alight’s platform remains competitively positioned, supporting long term fundamentals despite temporary growth delays.

Bearish Takeaways

Bearish analysts focus on the delayed growth acceleration, arguing it introduces uncertainty around the timing of revenue ramp and may cap near term share performance.
The reduced valuation multiple is interpreted as acknowledgement of higher execution risk, particularly around converting backlog into profitable, recurring revenue.
There is concern that investors may require several quarters of consistent margin improvement before reassigning a premium multiple to the stock.
Some caution that if macro or customer budget pressures persist, the backlog could take longer than expected to translate into top line growth, extending the recovery timeline.

What's in the News

Alight appointed Rohit Verma as its next CEO, effective January 1, 2026. Current CEO Dave Guilmette will step down at year end 2025 (company announcement).
The company completed a major share repurchase program, buying back about 42.6 million shares for $284.47 million, or roughly 8.04% of shares outstanding, under its August 2022 authorization (company filing).
Alight issued 2025 revenue guidance of $2,252 million to $2,282 million, providing investors with updated visibility into next year’s top line trajectory (earnings guidance).
The company recorded a $1,338 million goodwill impairment for the quarter ended September 30, 2025, signaling a significant non cash adjustment to its balance sheet (financial results).
Alight expanded its AI capabilities through a multi year collaboration with IBM to embed Watsonx across its Worklife platform, aiming to modernize benefits administration and boost client and employee productivity (client announcement).

Valuation Changes

The discount rate has fallen slightly from 11.02% to approximately 10.61%, implying a modestly lower required return on equity.
Revenue growth assumptions are essentially unchanged, edging down marginally from about 1.27% to 1.27%.
Net profit margin assumptions remain effectively flat, with a negligible increase from about 1.86% to 1.86%.
The future P/E has declined slightly from roughly 89.5x to 88.6x, reflecting a small reduction in the long-term valuation multiple applied.

AI-driven automation, expanded partnerships, and a shift to cloud-based recurring revenue are driving higher profitability, revenue stability, and market expansion.
Increased demand for integrated HR solutions, improved commercial execution, and a robust sales pipeline support long-term growth and greater earnings visibility.
Slowed new business, weak project demand, and flat client growth, coupled with dependence on large clients and uncertain returns on investments, threaten revenue stability and margin expansion.

Catalysts

About Alight

A technology-enabled services company worldwide.What are the underlying business or industry changes driving this perspective?

Adoption of AI-enabled automation and data analytics is improving operational efficiency and enhancing client experience, demonstrated by reduced call volumes and margin expansion, which should drive continued net margin improvement and higher profitability.
Expanding partnerships-such as the new alliance with Goldman Sachs Asset Management-are expected to unlock new recurring revenue streams (e.g., wealth management products) and broaden Alight's addressable market, contributing to future revenue growth.
Ongoing shift to high-margin, cloud-based, recurring revenue models (over 93% of revenue is now recurring), along with increased wallet share from service expansions in large client renewals, is likely to support revenue stability and further margin expansion over time.
Rising complexity in workforce regulations and growing employer focus on employee well-being and financial wellness is increasing demand for integrated, scalable HR solutions like Alight's, supporting long-term revenue growth potential.
A strong pipeline (with late-stage opportunities up 35% year-over-year), combined with strengthened commercial execution and new domain talent, positions Alight to accelerate bookings growth and improve earnings visibility as deal closure rates rebound.

Alight Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Alight's revenue will grow by 3.0% annually over the next 3 years.
Analysts assume that profit margins will increase from -47.8% today to 5.6% in 3 years time.
Analysts expect earnings to reach $142.2 million (and earnings per share of $0.17) by about September 2028, up from $-1.1 billion today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 38.6x on those 2028 earnings, up from -1.9x today. This future PE is greater than the current PE for the US Professional Services industry at 26.1x.
Analysts expect the number of shares outstanding to decline by 0.68% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.88%, as per the Simply Wall St company report.

Alight Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Prolonged and increasingly complex sales cycles, combined with execution challenges in commercial operations, have delayed new client signings and upsell opportunities, which may lead to persistent revenue timing headwinds and slower top-line growth if not fully resolved.
Project revenues have declined by 20% year-over-year and show no signs of near-term recovery, as clients delay or reassess nonrecurring initiatives, limiting opportunities for incremental revenue and pressuring overall growth targets.
Flat participant counts and volumes, despite previous expectations of moderate growth, indicate possible saturation in core markets or limited expansion of employer clients, constraining revenue and long-term scalability.
Alight's reliance on expanding wallet share with existing large enterprise clients and Fortune 500 companies increases vulnerability to client concentration risk, which could negatively impact future revenue stability and margin predictability if retention or expansion slows.
Continued investments in transformation initiatives, domain expertise hiring, technology (AI, automation), and strategic partnerships may not yield anticipated cost synergies or higher margins, posing a risk to net margin expansion and future earnings if additional profitability is not realized.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $8.214 for Alight based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $11.0, and the most bearish reporting a price target of just $6.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.5 billion, earnings will come to $142.2 million, and it would be trading on a PE ratio of 38.6x, assuming you use a discount rate of 8.9%.
Given the current share price of $3.92, the analyst price target of $8.21 is 52.3% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Weigh In on Alight as Price Targets Dip Amid Mixed Growth Outlook