Here’s why BILL stock just rose 6%

Key points

• BILL Holdings was one of the top gainers on Monday, as its stock price jumped 6%.

• The rise comes just days after the stock price plummeted 10%.

• Is BILL stock a good buy?

It has been a volatile past couple of trading days for BILL Holdings.

BILL Holdings (NYSE: BILL), the parent company for payment and billing provider BILL, saw its stock price shoot almost 6% higher on Monday, making it one of the top gainers on the day.

The stock has experienced a volatile past couple of days since it reported its fiscal fourth quarter earnings last week. The company easily beat revenue and earnings expectations for the quarter, yet the stock tanked nearly 10% post earnings.

Let’s take a look at why it fell so sharply last week and what triggered BILL stock to rise on Monday.

BILL beats earnings estimates

BILL’s fourth quarter results were strong, as the provider of billing and payment solutions for small businesses easily topped earnings estimates.

Revenue surged 16% year over year to $343.7 million, which bested revenue estimates of $328 million. Core revenue, which consists of subscriptions and transactions fees, rose 16% year over year to $301 million. Transaction fees, which are fees the company gets from processing transactions for clients, rose 22% while subscriptions for its services saw a 2% revenue decline.

Net income improved to $7.6 million, or 7 cents per share, up from a $15 million loss the same quarter a year ago. Adjusted earnings were 57 cents per share, up from 48 cents per share in the same quarter of the previous fiscal year and ahead of 47 cents per share estimates.

“Our financial performance demonstrated the strength of our business and the rigor of our execution in driving growth and expanding profitability in a muted economic environment,” John Rettig, BILL president and CFO, said. “In fiscal 2025, we plan to make targeted investments that accelerate our strategic priorities and ability to capture the large, greenfield market opportunity that we are serving. We believe these investments will reinforce our industry leadership and position us to deliver significant, sustainable revenue growth and margin expansion in future periods.”

It was the outlook for fiscal 2025 was what concerned some investors and why the stock price tanked last Friday after earnings.

Outlook calls for big investments, slower growth

BILL stock got several analyst downgrades last week, mainly due to its projections for slower growth. Among them was Goldman Sachs, which dropped the price target to $54 from $86 and lowered its rating to neutral from buy.

While revenue is projected to increase 13% to 15% year over year to $346 million to $351 million in Q1, adjusted earnings were anticipated to be 48 cents to 51 cents, below analysts’ estimates.

Also, for the full fiscal year, revenue projections of $1.42 billion to $1.45 billion were roughly in line with expectations, but adjusted earnings were projected to be below estimates. BILL called for adjusted EPS of $1.36 to $1.61 for fiscal 2025, which is significantly lower than $2.12 per share for fiscal 2024 and way off of consensus estimates of $2.22 per share.

This is mainly due to the significant investments the company is making in its strategic priorities to gain market share, as Rettig referenced in his comments.

While these moves could pay off for BILL in the long run, they seemed to scare off investors last week as they are expected to place a drag on earnings next year.

Why BILL stock jumped 6% Monday

The market reacted swiftly and aggressively to BILL’s outlook, with investors selling off shares as several analysts lowered their price targets.

But as is often the case, the selloff created a buying opportunity, as investors saw an opportunity Monday to buy stock in a solid, growing company that is investing in its future.

The stock comes pretty cheap right now, especially in relation to its long-term growth prospects, with a low five-year P/E-to-growth (PEG) ratio of 0.69, suggesting BILL stock is considerably undervalued.  

It is currently trading at $50 per share and has a median price target of $68 per share. The street still sees significant upside for BILL, despite the muted outlook.

It might be a good idea for investors to gain more visibility on its investment plans and how it will execute on its long term growth strategy. However, its consistent revenue growth and low valuation make BILL stock worth watching.