The technology sector is in the throes of the worst bear market since the Great Recession in 2007-09. The Nasdaq-100 index, which is home to some of the largest tech stocks in the world, is down 30.4% so far in 2022.
In these circumstances, it can sometimes be useful to observe what professional analysts on Wall Street are doing and saying about various stocks. While they don't always get things right, they can help investors identify companies that continue to do well despite the slowing economy and grim stock market returns.
One such company on analysts' radars at the moment is Bill.com (BILL +0.65%). It nearly doubled its revenue in the first quarter of fiscal 2023 (which ended Sept. 30), and 91% of analysts tracked by The Wall Street Journal have given Bill.com stock the highest possible buy rating -- with not a single one recommending selling. Here's why.
NYSE: BILL
Key Data Points
Bill.com is a one-stop-shop for small-business transactions
Cloud computing technology is commonly used to bring businesses into the digital age and streamline their operations. Bill.com's flagship cloud-based digital inbox does just that -- it's designed to clean up the accounts-payable workflow for small to mid-sized businesses, eliminating messy paper trails and facilitating simple payments.
Businesses can aggregate all of their incoming invoices into their digital inbox, pay them in a single click, and have the transactions logged in their bookkeeping software automatically. And thanks to Bill.com's acquisition of Invoice2go last year, it also covers the accounts-receivable side of the equation, enabling businesses to create and send invoices and monitor incoming payments.
Across the two platforms, plus its expense-management tool, Divvy, Bill.com served 420,000 business customers in the first quarter of fiscal 2023. Overall, the company processes payment volume at an annual run rate of $250 billion, which is key because transaction fees account for the majority of its revenue.
Bill.com's financials point to long-term success
Like most companies in this economic environment, Bill.com is experiencing a slowdown in its revenue growth. But Bill.com's slowdown might feel a little different from others because it still nearly doubled its sales year over year during the first quarter.
Bill.com is still making net losses; it was in the red to the tune of $81.6 million in Q1. But let's consider a few important caveats regarding that note. First, the company has more than $2.6 billion in cash, equivalents, and short-term investments on its balance sheet, so it has plenty of runway to continue investing in growth.
Second, investing in that growth makes clear economic sense. Why? Because Bill.com has a net dollar retention rate of 131%, which means its customers are spending 31% more money with the company each year. In other words, every new customer it acquires will grow far more valuable over time.
Finally, Bill.com has a very high adjusted gross profit margin of 86%, so it has plenty of control over whether it generates a net profit or a net loss, because it can simply trim operating costs to deliver positive earnings. But given the first two points, its current strategy is correct despite the company losing money in the short term.
Wall Street is extremely bullish on Bill.com stock
Bill.com stock is down by 65.8% from its all-time high, but that hasn't dampened the enthusiasm on Wall Street. The Wall Street Journal tracks 24 analysts covering the stock, and 22 of them gave it the highest possible buy rating while the remaining two maintain a neutral rating. Not a single analyst recommends selling.
The average of their price targets is $183.15, which suggests Bill.com stock could gain about 56% from its current price. But one analyst is particularly bullish, predicting it could soar by a whopping 113% to $250.
Bill.com has strong prospects for long-term success because its addressable market could be as large as 70 million business customers globally, with $125 trillion in annual payment volume. It suggests the company has only scratched the surface of its opportunity, which is why Bill.com stock looks like a buy right now.
