ERP Integrations And Digital Payments Will Unlock Opportunities

Key Takeaways

• Expanded ERP integrations and digital payment migrations are expected to boost customer growth, revenue, and margin amid a broader B2B e-payment market shift.
  
• AI-driven automation and value-added fintech product rollouts are set to increase operational efficiency, elevate revenue per user, and support long-term earnings stability.
  
• Persistent macroeconomic and competitive challenges, lagging new customer growth, and reliance on innovation create significant risks to accelerating revenue, margin, and earnings expansion.

Catalysts

Provides accounts payable (AP) automation software and payment solutions for middle market businesses and their suppliers in the United States.

• New and expanded ERP integrations and embedded strategic partnerships (such as AppFolio and M3) across core verticals are expected to meaningfully increase customer acquisition and engagement beginning in late 2025 into 2026, setting the stage for accelerated revenue growth as the addressable market expands.
  
• AvidXchange's accelerated migration of payment transactions from paper checks to digital modalities (aided by the new AvidPay 2.0 platform and strategic fintech partnerships) positions it to capture a far greater share of growing B2B e-payment volumes, driving higher payment revenue and improving gross margins as check-related processing costs decline.
  
• Ongoing innovation in AI-driven automation (applied to both internal operations and to customer-facing products such as Payment Accelerator 2.0 and spend management solutions) is expected to deliver continued operating leverage-enabling expansion of non-GAAP gross margins toward 80% and improvement in EBITDA/net margins.
  
• Rapid scaling of value-added financial technology products (Payment Accelerator 2.0 and spend management, with full rollouts expected in late 2025 and 2026) is anticipated to raise average revenue per user and diversify revenue streams, supporting higher total revenues and stabilizing earnings over the long term.
  
• Robust trajectory in monetization and transaction yield-supported by ongoing pricing strategy optimization, increasing e-payment penetration, and AI-powered fraud prevention initiatives-is likely to further enhance revenue per transaction and provide additional margin lift as payment mix shifts away from lower-margin check processing.

AvidXchange Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming AvidXchange Holdings's revenue will grow by 10.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.4% today to 10.3% in 3 years time.
• Analysts expect earnings to reach $60.8 million (and earnings per share of $0.38) by about July 2028, up from $1.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 40.9x on those 2028 earnings, down from 1102.2x today. This future PE is greater than the current PE for the US Diversified Financial industry at 15.9x.
• Analysts expect the number of shares outstanding to decline by 0.67% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.11%, as per the Simply Wall St company report.

AvidXchange Holdings Future Earnings Per Share Growth

Risks

• Macroeconomic uncertainty and subdued discretionary spending among middle market customers continue to weigh on transaction retention rates and new customer growth, which could lead to persistent below-target revenue growth and limit the pace of future earnings expansion.
  
• Management has acknowledged that the recent strong margin improvements have been largely achieved through aggressive operating discipline, AI-driven automation, and cost control, but future gross margin expansion toward the targeted 80% may be nonlinear and could stall if top-line growth does not accelerate, potentially constraining net margin improvements.
  
• Growth in new buyer logos and overall transaction volumes has slowed compared to prior periods, and the company's guidance does not assume improvement in these metrics for 2025, suggesting a risk that AvidXchange may be approaching TAM saturation or facing increased competitive pressure that could suppress revenue growth.
  
• The outlook for 2025 anticipates a reduction in high-margin, non-recurring revenues such as float (interest on customer funds) and political media revenue, which will not be replaced by core business growth in the near term, likely resulting in pressure on total revenue and EBITDA.
  
• The rapid scaling of new innovative products (e.g., Payment Accelerator 2.0, Pay 2.0, spend management) is critical to achieving higher transaction yields and diversified revenue streams, but if adoption lags or operational execution falls short, these initiatives may not sufficiently offset existing macro and competitive headwinds, impeding both revenue and net income growth.

Valuation

• The analysts have a consensus price target of $10.0 for AvidXchange Holdings based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $591.0 million, earnings will come to $60.8 million, and it would be trading on a PE ratio of 40.9x, assuming you use a discount rate of 7.1%.
• Given the current share price of $9.84, the analyst price target of $10.0 is 1.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.