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Up 300% YTD, is Still a Buy?

Remote working has accelerated demand for’s (BILL) cloud-based financial software. This, along with growing demand for its simplified payment solutions from SMB’s, could lead to a substantial increase in the company’s earnings and revenue. So, despite a skyrocketing rally so far this year, we think BILL still has plenty of upside left. Holdings, Inc. (BILL) offers a cloud-based software that digitizes and automates back-office financial operations for small and midsize businesses (SMB) worldwide. The company also markets artificial-intelligence-enabled financial software platforms. With more SMB customers now reopening their businesses, BILL is expected to experience higher demand for its online billing services in the coming months.

The Covid-19 pandemic has been a boon for many fintech companies, with individuals and businesses doing more transactions remotely. BILL is well positioned to benefit from this ongoing digitization of B2B payments due to businesses’ increasing adoption of its cost-effective and productive digital solutions. Also, strong demand across all channels, due to the need to manage back-office financial operations remotely, should keep driving the company’s revenues.

A Growing customer-base and revenues have allowed BILL to gain 277% year-to-date. This impressive performance, combined with several other factors, has helped BILL earn a “Strong Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates BILL:

Trade Grade: A

BILL is currently trading above its 50-day and 200-day moving averages of $111.45 and $82.53, respectively, indicating that the stock is in an uptrend. Also, the stock has gained 59.9%, over the past three months, reflecting solid short-term bullishness.

BILL’s revenue has increased 31.4% year-over-year to $46.21 million in the first fiscal quarter ended September 30, 2020. The increase in revenue was primarily attributable to a significant increase in subscription and transaction revenue. Its gross profit has risen 31% from the year-ago value to $34.10 million, while cash and cash equivalents have grown 554.1% from the prior-year quarter to $564.15 million over this period.

On December 9, BILL and Wells Fargo & Company (WFC) introduced Bill Manager, a new platform that offers businesses the option to pay and get paid with increased simplicity. This strategic partnership will help BILL to create connections between businesses and their clients, which should drive revenue growth for the company.

On December 1, the company announced the closing of a $1.15 billion of zero-percent senior notes offering. BILL intends to use approximately $1.10 billion of the net proceeds from the offering to fund capital expenditures, potential acquisitions, and strategic transactions.

Buy & Hold Grade: A

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, BILL is well positioned. The stock is currently trading just 1.7% below its 52-week high of $145.97, which it hit on December 11th. This can be attributed to the increasing adoption of BILL’s payment platform.

Peer Grade: A

BILL is currently ranked #13 of 96 stocks in the Software – Application industry. Other popular stocks in this industry are Oracle Corporation (ORCL), Microsoft Corporation (MSFT) and Adobe Inc. (ADBE)

ORCL, MSFT, and ADBE gained 14.4%, 35.2%, and 44.3% year-to-date, respectively. This compares to BILL’s 277% returns over this period.

Industry Rank: A

The Software – Application industry is ranked #20 of the 123 industries. The companies in this industry design, develop, and support software used to collect, store, report, and analyze data from various business operations.

The demand for software applications have increased significantly amid the pandemic. More businesses and employees are using cloud collaboration platforms to communicate to remain functional. We think the increased investments on IT infrastructure by businesses should lead to continued growth of software application providers in the upcoming months.

Overall POWR Rating: A (Strong Buy)

BILL is rated “Strong Buy” due to its impressive financials, short-and-long-term bullishness, solid price momentum, and underlying industry strength, as determined by the four components of our overall POWR Rating.

Bottom Line

BILL is well positioned to climb in the upcoming months despite gaining 277% year-to-date. With many countries experiencing a second wave of coronavirus infections, the need for digital transformation is increasing, which should keep benefiting BILL.

Analyst sentiment, which provides a good sense of a stock’s future price movement, is good for BILL. It has an average broker rating of 1.33, indicating favorable analyst sentiment. Of11 Wall Street analysts that rated the stock, 8 rated it a “Strong Buy.” The consensus EPS estimate for the next year indicates a 28% improvement year-over-year. Moreover, BILL has an impressive earnings surprise history, with the company beating consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $251.83 million for the next year represents a 28.9% increase from the same period last year.

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BILL shares were trading at $141.87 per share on Monday morning, down $1.56 (-1.09%). Year-to-date, BILL has gained 272.85%, versus a 16.12% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.


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