Interoperable Platforms And AI Data Modernization Will Transform Cloud Solutions

Key Takeaways

• AvePoint's strategies in platform interoperability, AI data focus, and cloud expansion are set to drive strong revenue and market share growth.
  
• Strategic acquisitions and focus on recurring revenue and retention indicate robust financial prospects and improved margins.
  
• Reliance on non-GAAP measures, complex expansion strategies, and slow platform adoption pose risks to growth, revenue stability, and investor trust.

Catalysts

Provides cloud-native data management software platform in North America, Europe, the Middle East, Africa, and the Asia Pacific.

• AvePoint's platform strategy emphasizes interoperability, addressing multiple large-scale data management challenges, which is expected to drive significant customer expansions and new wins, positively impacting revenue growth.
  
• The shift in AI technology from who has the best model to who has the most high-quality data positions AvePoint to benefit as businesses invest in data modernization and governance, likely boosting future revenues.
  
• The strategic acquisition of Ydentic enhances AvePoint's offerings for managed service providers, creating new economic opportunities and potentially increasing revenue streams and market share.
  
• Expansion into Google Cloud and Workspace with new data security solutions broadens AvePoint's multi-cloud environment offerings, expected to drive revenue growth through diversification and capturing more of the growing cloud market.
  
• Continued focus on increasing ARR (annual recurring revenue) and NRR (net retention rate) through product expansion and strategic pricing initiatives suggests robust revenue growth and improved net margins in the future.

AvePoint Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming AvePoint's revenue will grow by 19.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from -8.8% today to 9.4% in 3 years time.
• Analysts expect earnings to reach $53.5 million (and earnings per share of $0.29) by about May 2028, up from $-29.1 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 109.1x on those 2028 earnings, up from -114.0x today. This future PE is greater than the current PE for the US Software industry at 31.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.67%, as per the Simply Wall St company report.

AvePoint Future Earnings Per Share Growth

Risks

• The reliance on non-GAAP financial measures and the caution that these should not be considered superior to GAAP measures may concern investors about the reliability of reported profitability, potentially impacting future trust in earnings announcements.
  
• The focus on expansion into highly regulated industries and regions with complex requirements, such as Japan, signifies strategic risks that may not quickly translate into increased revenues or market share if challenges aren't keenly navigated.
  
• The company's emphasis on a platform approach over point solutions might inadvertently result in slower revenue recognition due to longer sales cycles as customers may require more time to evaluate comprehensive offerings compared to niche, focused solutions.
  
• With significant growth expectations tied to AI and data modernization, any failure to meet the accelerating demands in these rapidly evolving areas could stall anticipated ARR growth, affecting the perception of AvePoint's ability to capture emerging market opportunities.
  
• The potential for adverse impacts from global economic factors, such as currency fluctuations highlighted in revenue growth discrepancies, poses risks to revenue stability, which can influence overall financial performance.

Valuation

• The analysts have a consensus price target of $18.833 for AvePoint 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 $26.0, and the most bearish reporting a price target of just $15.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $566.4 million, earnings will come to $53.5 million, and it would be trading on a PE ratio of 109.1x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of $16.35, the analyst price target of $18.83 is 13.2% 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.