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Why Q2 Holdings Stock Soared 54.1% in the First Half of 2019

By Steve Symington - Jul 8, 2019 at 8:33PM

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The digital-banking solutions company continues to expand its reach.

What happened

Shares of Q2 Holdings ( QTWO 3.75% ) climbed 54.1% in the first six months of 2019, according to data from S&P Global Market Intelligence, as the digital-banking solutions company delivered solid quarterly financial results and continued to expand its addressable markets through new acquisitions.

Unlike many other volatile tech names, that's not to say Q2's rise came in big single-day chunks -- though it helped that the S&P 500 also climbed more than 17% in the first half of the year. Rather, Q2 stock has steadily, repeatedly eclipsed its all-time highs this year as investors absorb the progress and expansion of its underlying businesses.

Dark blue stock market charts indicating gains.

IMAGE SOURCE: GETTY IMAGES.

So what

Q2 most recently announced stronger-than-expected first-quarter results in early May, achieving a new company record for quarterly bookings while revenue climbed more than 30% to $71.3 million. Q2 also saw the number of users for its namesake platform increase 19% year over year to 13.1 million.

Meanwhile, Q2 closed on its acquisitions of Gro, a digital sales and onboarding solutions leader, and aptly named lending platform specialist Cloud Lending in late 2018. And the company wasted no time capitalizing on its purchases, securing multiple large contracts last quarter centering on the offerings of its newest subsidiaries. To those ends, Q2 management noted they're now chasing a total addressable market of approximately $8 billion, a massive increase from the $3.5 billion TAM Q2 boasted at the time of its initial public offering in 2014. 

Now what

What's more, Q2 might be gearing up for more acquisitions going forward. In early June, the company raised over $500 million by issuing new stock and convertible bonds, briefly pulling back in response as market gauged the impact of this new debt and dilution. But if Q2 is able to seamlessly integrate any future acquisitions while driving organic growth from its existing product portfolio, I believe the stock will only continue to rise over the long term.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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