Mitek Systems ( NASDAQ: MITK ) stock climbed to a near 3-month high on Friday after the digital identity verification firm reported Q3 results that came in slightly above Street expectations.
Q3 adj. EPS was $0.23, flat Y/Y. Revenue grew 23.7% Y/Y to $39.3M as consumers transact more business online, leading to more demand for identity verification.
Software and hardware revenue increased 16.8% to $19.8M, driven by growing contribution of ID R&D continued mobile deposit reorders and Check Fraud Defender revenue.
Services and other revenue rose 31.8% to $19.5M.
"... we saw new use cases for our identity verification solution such as regulatory requirements for U.K. around right-to-work and right-to-rent initiatives; verification for a new interactive gaming client for in-game purchases; and attendee verification for events," said CFO Frank Teruel in a post-earnings call .
"We expect sales from our MiVIP platform will help us accelerate identity revenue growth in FY23," he added.
MITK expects its identity business to reach profitability in H2 FY24.
After the earnings report, H.C. Wainwright cut its price target on MITK to $19 from $22 (potential upside of 110.6% to last close), saying market conditions warrant a lower multiple on the shares.
"While some deterioration in the macro environment appears likely, we believe MiVIP should meaningfully increase potential use cases, driving incremental revenue growth," said analyst Scott Buck.
MITK reported Q3 gross margin of 88.4% vs. 89.3% in Q3 2021, which Buck said was impacted by the HooYu acquisition and macroeconomic headwinds, including forex and slowdown in the U.S. economy. These factors will "likely put further pressure on margin near term", Buck warned.
Wainwright maintained its Buy rating, saying investors should take advantage of current dislocation between operations and valuation. Its rating is in-line with bullish sell-side ratings .
But SA Quant rating on MITK is Strong Sell as it is at high risk of performing badly .
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Mitek Systems stock hits near 3-month high on strong Q3 results