Last Update 17 Dec 25

VERX: Shares Will Recover As CEO Transition And Buyback Support Turnaround

Vertex's average analyst price target has been lowered by several dollars to the mid 20 dollar range, as analysts factor in mixed Q3 results, reduced guidance, softer ARR growth, and a more challenging near term outlook, despite longer term growth levers and a solid competitive position.

Analyst Commentary

Street research following the Q3 print reflects a more cautious posture on Vertex in the near term, with most models recalibrated to lower growth and margin trajectories, but also recognition that the long term opportunity and competitive positioning remain intact.

Bullish Takeaways

Bullish analysts still see upside from current levels, arguing that shares trade near trough valuation multiples relative to peers and Vertex's own history. They note that this could re-rate if execution stabilizes.
Some expect growth to re-accelerate over the medium term, citing many levers including e-invoicing adoption, product cross sell, and the potential for a return to high teens ARR growth once current headwinds abate.
Several notes emphasize Vertex's durable competitive moat in enterprise indirect tax, suggesting its market leadership and mission critical software should support resilient demand and margin recovery over time.
Forward looking commentary around 2026 and beyond is viewed positively, with bulls framing current disruptions, including leadership transition and legacy product deprecations, as manageable execution risks rather than structural issues.

Bearish Takeaways

Bearish analysts highlight the broad reset in price targets to the low to mid 20 dollar range, reflecting tempered expectations for ARR growth, margin expansion, and overall return potential over the next 12 to 24 months.
Recent Q3 results and reduced guidance are seen as evidence that multiple pillars of the growth framework are under pressure, including net revenue retention, which has ticked down due to churn and legacy deployment deprecations.
There is concern that the updated 2025 outlook and Q4 guide, with growth only modestly above industry lows, point to a more prolonged period of subscale execution and a steeper path to achieving the 2028 re-acceleration framework.
Several research notes flag incremental risks around the CEO transition and the need to prove traction in cross selling newer offerings, arguing that investors are unlikely to assign a higher multiple until visibility on stabilization and execution improves.

What's in the News

Jefferies cut its Vertex price target to $28 from $35 but maintained a Buy rating, citing weaker net revenue retention and uncertainty around the CEO transition, alongside trough valuation and positive 2026 commentary (Jefferies research note).
Vertex announced an expanded strategic alliance with CPA.com and Kintsugi to deliver an AI driven, end to end sales tax compliance solution for CAS and SALT practices. The offering includes white label and hands free automation options as well as deep ERP and e commerce integrations (company press release).
The company issued 2025 guidance calling for fourth quarter revenues of $192 million to $196 million and full year revenues of $745.7 million to $749.7 million. This guidance implies only modest growth acceleration relative to current trends (company guidance).
Vertex authorized a share repurchase program of up to $150 million of Class A common stock, with no expiration date, following board approval of the buyback plan on October 30, 2025 (company announcement).
Effective November 10, 2025, long time CEO David DeStefano will retire and transition to non executive chair. Former Microsoft business development executive Christopher Young has been appointed as the new CEO and board member (company announcement).

Valuation Changes

Fair Value Estimate: Unchanged at approximately $27.86 per share. This indicates no revision to the intrinsic value assessment.
Discount Rate: Fallen slightly from about 8.76 percent to 8.75 percent, reflecting a marginally lower assumed cost of capital.
Revenue Growth: Effectively unchanged at roughly 11.52 percent, suggesting stable long term top line growth expectations.
Net Profit Margin: Largely unchanged at about 1.14 percent, indicating minimal adjustment to long term profitability assumptions.
Future P/E Multiple: Edged down slightly from around 504.51x to 504.45x, signaling a negligible reduction in the forward valuation multiple applied.

Regulatory changes and enterprise cloud upgrades are boosting demand for Vertex's tax automation and e-invoicing solutions, supporting robust customer growth and recurring revenue expansion.
Efficiency gains and higher-margin cloud revenue are driving improved profitability, supporting long-term growth in both margin and recurring revenue streams.
Sluggish market conditions, heightened competition, and regulatory changes threaten Vertex's revenue growth, margin stability, and international expansion due to delayed deals and increased costs.

Catalysts

About Vertex

Provides enterprise tax technology solutions for retail trade, wholesale trade, and manufacturing industries in the United States and internationally.What are the underlying business or industry changes driving this perspective?

Significant near-term acceleration is expected as regulatory mandates for e-invoicing begin in major European economies like France and Germany in 2026-2027, forcing multinational enterprises to adopt advanced tax automation solutions-a dynamic that should drive robust new customer wins and recurring revenue expansion for Vertex.
Looming cloud ERP migration deadlines across the enterprise landscape over the next 2+ years are likely to intensify as companies upgrade core financial systems, increasing demand for Vertex's cloud-native tax engines and integrations, ultimately driving subscription and cloud revenue growth and improving recurring revenue mix.
Expanded adoption and country coverage in Vertex's e-invoicing solution is establishing a "land and expand" model, where early adopters are rapidly licensing additional regions as they globalize operations, supporting strong net revenue retention and long-term ARR growth.
State and local budget pressures and increased regulatory complexity in the U.S. are driving more frequent rate and rules changes, making robust tax compliance platforms a necessity and increasing adoption rates among new and existing customers, which should support revenue growth over time.
Internal technology investments and measured expense controls are improving operating efficiency and setting up for greater margin leverage as cloud revenue grows as a share of the business, contributing to long-term EBITDA and net margin expansion.

Vertex Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Vertex's revenue will grow by 14.6% annually over the next 3 years.
Analysts assume that profit margins will increase from -7.1% today to 6.7% in 3 years time.
Analysts expect earnings to reach $71.6 million (and earnings per share of $0.94) by about September 2028, up from $-50.4 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 113.4x on those 2028 earnings, up from -78.3x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to grow by 2.25% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.66%, as per the Simply Wall St company report.

Vertex Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Prolonged macroeconomic uncertainty and slowing ERP cloud migrations-especially in the U.S., Vertex's largest market-are elongating enterprise sales cycles and pipeline build, which could result in lower revenue growth and delayed realization of projected upsells and true-ups.
Increased competition from other major global tax compliance vendors such as Sovos and Thomson, along with hundreds of local providers in key markets (e.g., Europe), may force Vertex to invest heavily or adjust pricing to win deals, negatively impacting net margins.
Vertex's dependence on large enterprise customers with significant entitlement and true-up deals exposes the company to substantial variability in annual recurring revenue; any attrition or delay among these clients can materially affect earnings stability and growth.
Uncertainty and confusion caused by ongoing tax and regulatory reforms (e.g., in Brazil and Europe) are delaying customer decision-making and deal closures, which can suppress both top-line revenue and recurring revenue metrics in key international expansion markets.
Heavy ongoing investment in new product areas like AI, expanded country coverage for e-invoicing, and partner enablement-if adoption or migration pace is slower than anticipated-may lead to a prolonged period of elevated expenses, compressing operating margins and potentially reducing free cash flow.

Valuation

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

The analysts have a consensus price target of $37.231 for Vertex 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 $50.0, and the most bearish reporting a price target of just $25.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.1 billion, earnings will come to $71.6 million, and it would be trading on a PE ratio of 113.4x, assuming you use a discount rate of 8.7%.
Given the current share price of $24.75, the analyst price target of $37.23 is 33.5% 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.

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