Shares of recent IPO and automated accounts receivable and accounts payable company Bill.com (BILL 1.15%) closed up 8% in Thursday trading, after rising as much as 10% earlier in the day on support from an upgrade received from investment bank Piper Sandler.
Piper Sandler said it was upgrading Bill.com stock -- currently trading just shy of $70 -- to $85 a share, which implies a better than 21% profit potential.
Bill.com stock is up 81% over the past year but has fallen 16% from its all-time high that it hit three weeks ago. Piper believes the stock has fallen sufficiently to put its "risk-reward" back in the "favorable" column.
Piper argued that over the next decade, more and more back-office business functions will become automated, which is precisely what Bill.com's software aims to help make happen. In the analyst's opinion, such a trend will benefit Bill.com by generating recurring revenue from customer subscriptions to its services.
That being said, booking revenue has never been Bill.com's problem. In fact, according to data from S&P Global Market Intelligence, revenue at this company more than doubled over the past two years. The problem is that, so far at least, Bill.com hasn't been able to turn its revenues into profits. The company lost more than $7 million last year -- and more than $26 million over the last 12 months.
Until Bill.com can prove it's able to generate a consistent profit, this investment has to be considered speculative -- no matter how fast it's growing its revenues.