BofA Lowers E2open's Price Target to $3.25, Maintains Underperform Rating

E2open's Q3 Subscription SaaS revenue fell 1% YoY to $132M, beating expectations and rising sequentially. However, Q4 SaaS revenue guidance was below consensus, implying continued year-over-year declines. BofA analyst Andrew Obin lowered the price target to $3.25 from $3.75 and maintained an Underperform rating on the shares.

E2open, the connected supply chain SaaS platform with the largest multi-enterprise network, reported its fiscal third quarter financial results on January 9, 2024. The company's GAAP subscription revenue for the quarter came in at $132.8 million, which was near the high end of its guidance range and a decrease of 1.5% year-over-year [1].

Despite the revenue decline, E2open's third quarter performance was noteworthy. The company maintained strong adjusted EBITDA margins and reported improved sales execution in both subscription and professional services. This was evident in large deal closings with new and existing clients across various industry sectors [1].

However, the company's guidance for the fourth quarter did not meet analysts' expectations. E2open forecasted a decline in subscription revenue for Q4, which suggests continued year-over-year declines [1]. This news led BofA analyst Andrew Obin to lower his price target on E2open's shares to $3.25 from $3.75 and maintain an Underperform rating [2].

The reasons behind E2open's revenue decline and the implications of its guidance for the future are worth exploring. While the company's revenue growth has been below its potential, it is focusing on improving sales execution, deepening client engagement, and delivering flawless implementations to re-accelerate growth [1].

However, conditions in some end-markets remain uncertain, which could impact E2open's revenue trajectory. Additionally, the company still has work to do to transform its go-to-market and client engagement model [1].

In conclusion, E2open's fiscal third quarter financial results showed improvement in sales execution but raised concerns about continued revenue declines. The company's guidance for Q4 suggests that it will take several quarters for E2open to materially impact its top line. Investors will be watching closely to see if the company's efforts to transform its business will bear fruit.

References:
[1] E2open Announces Fiscal 2024 Third Quarter Financial Results. (2024, January 9). Retrieved January 10, 2024, from https://investors.e2open.com/news/news-details/2024/E2open-Announces-Fiscal-2024-Third-Quarter-Financial-Results/default.aspx
[2] Obin, A. (2024, January 9). E2open: Q3 Beats, But 2024 Guidance Below Consensus. Retrieved January 10, 2024, from https://www.seekingalpha.com/news/3791957-e2open-q3-beats-but-2024-guidance-below-consensus?utm_source=feed_stock&utm_medium=referral