Shares of restaurant software company (NYSE:OLO) jumped 6.1% in the afternoon session after analyst Clarke Jeffries of Piper Sandler upgraded the stock's rating from Neutral (Hold) to Overweight (Buy). The analyst maintained a price target of $9, which implied a potential 34% upside from where shares were traded when the report was released. Jeffries sees the current price as an attractive entry point for Olo, driven by promising contributions from new product categories like payments, loyalty, and analytics. He also sees the expected post-Covid return of digital orders as a long-term growth driver. Furthermore, Jeffries believes that estimates of transaction revenue might be too conservative, with his analysis indicating that less than 5% transaction growth is implied through 2024. He added that Olo's growth could outperform expectations and potentially reaccelerate next year, reaching a substantial 20%.
What is the market telling us:
Olo's shares are not very volatile than the market average and over the last year have had only 27 moves greater than 5%. The previous big move was two months ago, when the stock gained 5.29% on the news that the company reported an impressive "beat and raise" quarter. First quarter results exceeded analysts' estimates for revenue, operating income, free cash flow, and earnings per share (EPS). Revenue retention rate also improved. Revenue guidance for the next quarter came in above Consensus, and full-year revenue guidance was lifted. Operating income guidance for the full year was roughly inline. Overall, it was a strong quarter for the company, given that online delivery businesses have struggled to maintain the post-pandemic momentum.
Olo is up 10.2% since the beginning of the year, but at $7.23 per share it is still trading 48.5% below its 52-week high of $14.05 from August 2022. Investors who bought $1,000 worth of Olo's shares at the IPO in March 2021 would now be looking at an investment worth $208.06.
Is now the time to buy Olo? Access our full analysis of the earnings results here, it's free.