Vertex is the IBD Stock Of The Day as the maker of corporate tax compliance software expands its footprint with an acquisition. VERX stock on Wednesday received a bullish report from investment bank Morgan Stanley.
Vertex shares hit a more than two-year high of 30 on Dec. 6 before trailing off over the next few weeks. But VERX stock is struggling find support at its 50-day moving average line, a key support level.
On the stock market today, VERX stock fell 3.7% to close at 25.82. It was up as much as 6.4% at 28.52 earlier in the session.
Vertex briefly reclaimed its 21-day exponential moving average during Wednesday's move but was back below the line in afternoon trading. Meanwhile, VERX shares could be working on a new consolidation.
VERX Stock Called A 'Winner For 2024'
In a client note on Wednesday, Morgan Stanley analyst Chris Quintero called VERX stock "an attractive buying opportunity." He rates Vertex as overweight, or buy, with a price target of 32.
Vertex is an "underappreciated SMID-cap winner for 2024," Quintero said. SMID-cap stocks are those with small to midsize capitalizations.
Investors sold off VERX stock after Vertex announced a plan to acquire e-invoicing leader Pagero for $555 million on Dec. 13.
Investors expressed concerns about equity dilution from the deal, which would expand the number of shares outstanding by about 11%. While the dilution is high, the valuation of the deal is reasonable, Quintero said.
Plus, the acquisition likely will accelerate Vertex's revenue growth to the high-teens percentage range, possibly low-20s, he said.
Pagero Deal Adds Missing Puzzle Piece
The e-invoicing opportunity is a natural fit for Vertex and is one that customers have been asking for, Quintero said.
Needham analyst Joshua Reilly also likes the Pagero deal.
"We are positive on the acquisition as it adds the one piece of the puzzle to manage global tax compliance Vertex was missing, e-invoicing," Reilly said in a client note. He rates VERX stock as buy with a price target of 35.
E-invoicing is needed to manage compliance with the value-added tax, or VAT, in the European Union.
"We believe the acquisition is timely given an increasing number of EU countries adopting e-invoicing mandates in the next two years," Reilly said.
VERX stock is on the IBD Tech Leaders list.
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