OneStream's AI Integration, Expanding CFO Platform, and High Retention Rate Poised to Fuel Strong Market Growth, Analysts Say

On Monday, multiple analysts initiated coverage on OneStream, Inc. OS. The company started trading on July 25, 2024, and set a price range of $23.00-$26.00 with a 180-day lockup period.

B of A Securities analyst Koji Ikeda initiated coverage on OneStream with a Buy rating and a price target of $35.

Truist Securities analyst Terry Tillman initiated coverage on OneStream with a Buy rating and a price target of $35.

JP Morgan analyst Mark Murphy initiated coverage on OneStream with an Overweight rating and a price target of $30.

B of A Securities: Professional software provider OneStream’s disruptive and differentiated offering allows it to steadily increase its share of the lucrative and lightly penetrated (~1%) $44 billion market for business performance management software, per Ikeda.

The offering has resulted in OneStream growing faster than the peer average (revenue +34% year-on-year vs. +12% peers for 2023), and the analyst expects this to continue (+27% versus +9% for 2024).

The analyst expects OneStream to extend its reach to every process overseen by CFOs backed by the software developer-friendly tool.

Ikeda also highlighted OneStream’s addition of artificial intelligence to its offerings, making it more difficult to replace.

The price target reflects a 14.5x EV/calendar year 2025 revenue or a growth-adjusted multiple of 0.7x, implying a premium to its back-office software peer averages at 5.5x and 0.5x. Ikeda noted that the premium is warranted given the company’s faster growth profile and potential to become a leading platform in the Office of the CFO.

Ikeda projected fiscal 2024 revenue and EPS of $476 million and $(2.31).

Truist Securities: OneStream benefits from an innovative, broad, and unified platform approach, which includes core finance apps and extends into additional finance and operational use cases and applied AI apps, Tillman said.

The analyst noted the company could sustain strong growth at scale, reach profitability in the near term, and ramp up positive free cash flow.

Currently, OneStream stock trades at 12.0x EV/calendar year 2025 sales, representing premium to 20%-plus growers trading at 7x EV/calendar year 2025 sales and 30%-plus growers trading at ~10x EV/calendar year 2025 sales.

Tillman noted premium valuation can be maintained based on strong ongoing business momentum (subscription revenue growth well over 40% recently, 30%+ ARR growth, and large customer traction) with a growing set of upside drivers ahead.

The analyst’s positive investment thesis is centered on the company sustaining impressive long-term compounding growth while generating substantial free cash flow over a long-term basis. Tillman projected fiscal 2024 revenue and EPS of $476 million and $(1.57).

JP Morgan: Murphy’s fundamentally positive view is rooted in multiple merits. The analyst flagged OneStream’s stickiness, with 98% gross retention on par with ServiceNow, cohesive or organic platform, creating a foundation for rapid enhancement, platform consolidator, replacing 2-6 legacy systems at deployment, ERP product replacement cycle catalysts and solid growth with free cash flow generation.

The analyst noted that OneStream stock appreciated ~60% from the midpoint of their original IPO filing range of $18 and ~44% from the final IPO price of $20.

The price target reflects a 12x EV/calendar year 2025 revenue, or 0.58x on a growth-adjusted basis, versus financial comps at 0.42x. Murphy noted a premium is justified given superior most recent quarter (MRQ) revenue growth, 98% gross retention, an organically developed platform, and potential for model upside.

Murphy noted that OneStream is positioned to capture incremental market share and continue to do so while moving toward improved cash generation, assuming continued execution.

Per the analyst, OneStream is a relatively attractive and differentiated asset in the software landscape, particularly given its organically developed platform. Murphy projected fiscal 2024 revenue and EPS of $476 million and $(1.54).

Price Action: OS stock traded higher by 0.98% at $28.99 at the last check on Monday.