On Monday, Lake Street Capital Markets adjusted its outlook on Forian Inc. (NASDAQ:FORA), reducing the price target to $4.50 from the previous $5.00, while sustaining a Buy rating on the company's shares.
The adjustment follows Forian's Q4 performance, which aligned with revenue expectations and exceeded consensus for Adjusted EBITDA by $0.5 million. Despite this, the company's predictability on a quarterly basis was affirmed.
Forian Inc. experienced contract cancellations from several accounts earlier in 2023, with the termination of these informatics contracts occurring in Q4 2023. The impact of these cancellations is projected to be most significant in the first half of 2024. The loss of these contracts was initially disclosed in August, but the subsequent adjustment to subscription revenue projections was deemed insufficient in retrospect.
The firm has revised its growth estimates for Forian Inc. in 2024, now forecasting single-digit growth for the first half of the year and double-digit growth in the latter half. This marks a scaling back from the previously anticipated 17% growth rate to a more conservative 10%.
Moreover, the target revenue multiple applied by Lake Street Capital Markets has been lowered, which contributed to the reduced price target of $4.50.
Lake Street's revised price target reflects the updated expectations for Forian Inc.'s performance in the upcoming year. The firm's analysis indicates a tempered but continued growth trajectory for the company, despite the recent setbacks in subscription revenue due to the concluded contracts.
InvestingPro Insights
Forian Inc.'s current market dynamics and future outlook present a mixed picture, as reflected in the latest data and analysis. According to InvestingPro Data, Forian Inc. holds a market capitalization of $98.49 million and trades at a P/E ratio of 66.4, which is high relative to near-term earnings growth.
Despite a challenging revenue growth scenario in the last twelve months with a decrease of 26.87%, the company maintains a strong gross profit margin of 73.26%. It's also worth noting that Forian has demonstrated a significant return over the past six months, with a 48.87% price total return, indicating a possible resurgence in investor confidence.
InvestingPro Tips highlight that Forian Inc. is in a robust financial position, with more cash than debt on its balance sheet and net income expected to grow this year. The management's aggressive share buyback strategy and the company's profitability over the last twelve months could be seen as positive indicators for potential investors. However, analysts anticipate a sales decline in the current year, which may be a point of consideration for those looking at the company's near-term revenue prospects. For those interested in a deeper dive into Forian Inc.'s financials and strategic positioning, InvestingPro offers additional tips, and users can apply the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription for more insights.
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