What Happened:
Shares of payments and billing software maker Bill.com (NYSE:BILL) fell 5.28% in the pre-market session after Morgan Stanley downgraded Bill.com to Equal Weight (Hold) from Overweight (Buy). Analyst Jonathan Lee took a deep dive into the B2B payments industry and came away less constructive on the Bill.com bull case of take rate expansion. Furthermore, he called out increasing competition from the likes of Intuit. Lee's price target on the stock is $105, based on ~7x EV/calendar year 2024 revenue.
What is the market telling us:
Bill.com's shares are very volatile and over the last year have had 61 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was about one month ago, when the company gained 16.2% on the news that the company posted a solid third-quarter with total payment volume (TPV), revenue, free cash flow, and earnings per share (EPS) all exceeding analysts' estimates. Impressively, TPV beat by roughly 10%. Customer growth also accelerated. Guidance for the full year was raised, and guidance for the next quarter came in above Consensus estimates. Overall, it was a nearly perfect quarter for the company, especially considering the mixed earnings results from its high-growth SaaS peers.
Bill.com is up 2.25% since the beginning of the year, but at $111.45 per share it is still trading 37.1% below its 52-week high of $177.31 from August 2022. Investors who bought $1,000 worth of Bill.com's shares at the IPO in December 2019 would now be looking at an investment worth $3,150.
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