Wells Fargo downgrades Bill.com stock over Visa/Mastercard settlement concerns

On Monday, Wells Fargo (NYSE: WFC ) adjusted its stance on Bill.com Holdings Inc. (NYSE: NYSE: BILL ) stock, downgrading from Equal Weight to Underweight and reducing the price target to $60 from the previous $70.

The decision follows the firm's earlier downgrade in January, which was prompted by a range of uncertainties and risks associated with the company's operations.

The analyst from Wells Fargo cited several persistent concerns that justified the downgrade, including questions about the company's added take rate following the Visa/Mastercard settlement. Additionally, the possibility of expanding the Bank of America (NYSE: BAC ) relationship to include the 'back-book' now seems increasingly unlikely.

The assessment by Wells Fargo also pointed to an underwhelming return from Bill.com's November Reduction in Force (RIF) initiative. The analyst interpreted this as an indication of limited operating leverage within the company's business model. This underperformance has contributed to the decision to place Bill.com on Wells Fargo's tactical ideas list for the second quarter of 2024.

Bill.com, which provides cloud-based software that automates complex back-office financial operations for small and midsize businesses, has been facing scrutiny from investors and analysts alike. With the latest downgrade, Wells Fargo signals a cautious stance on the company's stock for the upcoming period.

InvestingPro Insights

Amidst the concerns raised by Wells Fargo, it's worth noting some positive indicators for Bill.com Holdings Inc. (NYSE: BILL) that are highlighted in the "InvestingPro Tips". Management's aggressive share buyback strategy could signal confidence in the company's future, and the fact that Bill.com holds more cash than debt on its balance sheet provides a cushion against financial headwinds. Moreover, with analysts expecting net income growth this year and 19 analysts revising their earnings upwards for the upcoming period, there's a sentiment of optimism around the company's profitability prospects.

From a data perspective, Bill.com boasts an impressive gross profit margin of 85.65% for the last twelve months as of Q2 2024, which underscores the company's ability to maintain profitability at the gross level. Despite not being profitable over the last twelve months, analysts predict the company will turn a profit this year. Additionally, the stock's volatility, as evidenced by a 36.7% drop over the last six months, may present opportunities for investors with an appetite for risk.

For those interested in a deeper dive into Bill.com's financials and strategic positioning, there are additional "InvestingPro Tips" available that could provide further insights into the company's performance and outlook. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at Investing.com.

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