Here’s why the Envestnet stock price is soaring
Envestnet (NYSE: ENV) stock price continued its strong comeback this week amid rising optimism that it will become an acquisition target. The stock surged to a high of $73 on Thursday, its highest level since May 2022. It has more than doubled from its lowest level in November last year.
Potential acquisition target
Envestnet, a large software company valued at over $3.7 billion, is in the spotlight after it became an acquisition target. According to Bloomberg, the company has attracted bids from Advent and GTCR. It could also gain interest from other private equity companies in a deal that would value it at over $4 billion.
The company’s acquirer would get a company that is growing at a slower pace. Its annual revenue came in at $1.245 billion in 2023, up from $1.23 billion a year earlier. Its revenue was $900 million in 2019. Analysts expect that its annual revenue will be $1.37 billion and $1.5 billion in 2024 and 2025, respectively.
Envestnet is also losing money. Its annual net loss was over $238 million, a big increase from the $80 million it made a year earlier. Therefore, potential acquirers hope that their expertise can help the company gain market share, grow its revenue, and boost its profits.
Envestnet is not a well-known company because it does not offer retail-facing products. Instead, it provides software solutions to investment banks and wealth management firms.
For example, its Tamarac product is used by Registered Investment Advisors (RIA) to streamline and automate the wealth management process. It also offers wealth solutions like direct indexing, model portfolios, and tax management.
The potential acquisition comes at a time when demand for software companies is rising. Thoma Bravo has recently acquired Darktrace, a UK cybersecurity firm. Similarly, Advent bought Nuvei, a provider of payment solutions.
Investors love software companies because of their predictive revenues, low churn, and their substantial revenue growth. Also, in some instances, software companies have many opportunities to cut costs.
Envestnet stock price analysis
The daily chart shows that the ENV share price has been in a strong bull run in the past few weeks. It has recently jumped above the crucial resistance point at $63.40, its highest level in June 2023. Also, the stock has retested the key level at $69.20 (February 2023 high).
The stock has also formed a golden cross pattern when the 50-day and 200-day moving averages cross each other. Therefore, the stock’s outlook is bullish, with the next point to watch being at $80.
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