JPMorgan thinks Alkami is poised for long-term growth despite ongoing concerns in the banking industry. Analyst Alexei Gogolev initiated coverage on Alkami with an overweight rating and a $15 price target, which implies shares gaining 21.4% from Monday’s close. Alkami provides software to regional banks and credit unions to facilitate online banking. JPMorgan said said Alkami’s potential addressable market is at $11 billion in the U.S. as the modernization of digital banking for credit unions and regional banks continues. “Alkami runs a 100% cloud-based, multi-tenant and single code-hosted platform, which ensures substantial advantages vs. peers. With Alkami’s 96% subscription in revenues, 97% gross retention rate and 115% net dollar retention, the company has a high level of visibility into top-line growth (projected 3Y CAGR of 25%),” Gogolev wrote in a Tuesday note. “With $0.24B in [average recurring revenue] Alkami is a relatively small player, but the company appears to have been gaining share and displacing legacy banking solution providers,” he continued. To be sure, Gogolev acknowledged that the uncertainty surrounding the U.S. banking sector has put downward pressure on valuation multiples on stocks in the sector. “We flag that Alkami’s current customer base and main target audience are smaller regional banks that may see fewer outflows of deposits given higher share of those being FDIC insured,” the analyst said. “While it’s difficult to dislodge the already embedded market view around the headwinds that Alkami may face, we do not think we are likely to see a material hit to the number of digital accounts serviced by Alkami’s clients and hence would expect the company’s long-term growth and profitability targets to remain intact.” Shares have popped more than 15% over the last 12 months. However, they’re down year to date. —CNBC’s Michael Bloom contributed to this report.
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