ALIT: Backlog Momentum Will Drive Margin Expansion Despite Delayed Acceleration

Analysts have lowered their price target for Alight from $11.00 to $8.50, citing delayed growth acceleration and reduced profit margins. They note, however, that continued backlog growth supports future margin improvement.

Analyst Commentary

Analysts have shared a range of perspectives following the recent price target adjustment for Alight. Their commentary highlights both encouraging aspects and ongoing challenges for the company.

Bullish Takeaways

• Bullish analysts emphasize that Alight’s growing backlog is a positive indicator for future revenue streams.
• There is confidence in the company’s ability to eventually deliver margin expansion, supported by management's outlook.
• The current Buy rating is maintained by some, which suggests a belief in the company's long-term execution despite near-term obstacles.

Bearish Takeaways

• Some analysts remain cautious as growth acceleration has been delayed compared to earlier expectations.
• Profit margins have come under pressure, resulting in a lowered valuation multiple for the stock.
• Reduced near-term visibility into accelerated performance has prompted a re-evaluation of the company’s valuation.

What's in the News

• Repurchase of 6,580,136 shares from July to September 2025, completing a total buyback of over 42 million shares for $284.47 million since August 2022 (Buyback Tranche Update).
• An expanded, multi-year collaboration was announced with IBM to deploy AI solutions. The partnership aims to transform employee benefits and productivity, with pilot deployments expected in early 2026 (Client Announcements).
• A strategic partnership with MetLife was formed to bring guaranteed income annuities to the Alight Worklife® platform. This will enhance retirement options for more than 12 million defined contribution plan participants (Client Announcements).
• A limited release of a generative AI-powered benefits enrollment assistant will be available on Alight Worklife® for the 2025 annual enrollment season, providing personalized digital guidance to employees (Product-Related Announcements).
• Sword Health has been added to the Alight Partner Network, bringing AI-enabled musculoskeletal and behavioral health care solutions to clients with an outcome-based pricing model (Client Announcements).

Valuation Changes

• Fair Value: Decreased from $6.86 to $5.86. This reflects a lower anticipated intrinsic value per share.
• Discount Rate: Increased from 9.99 percent to 11.02 percent. This indicates greater perceived risk or uncertainty in future cash flows.
• Revenue Growth: Declined from 1.49 percent to 1.27 percent. This suggests reduced expectations for near-term expansion.
• Net Profit Margin: Dropped significantly from 7.01 percent to 1.86 percent, pointing to diminished profitability.
• Future P/E: Rose sharply from 26.82x to 89.54x. This indicates a higher valuation relative to forward earnings, potentially due to lower projected earnings.