Upland Gears Up to Report Q4 Earnings: Buy, Sell or Hold the Stock?

Core Viewpoint - Upland Software (UPLD) is expected to report a decline in revenues for the fourth quarter of 2024, despite benefiting from increased customer acquisitions and successful AI integrations. Revenue Expectations - Upland anticipates revenues between $65.9 million and $71.9 million for Q4 2024, reflecting a 5% year-over-year decline at the midpoint [2] - The Zacks Consensus Estimate for Q4 revenues is $68.06 million, indicating a 5.71% year-over-year decline [2] Earnings Estimates - The consensus estimate for earnings is 24 cents per share, representing a 71.43% increase from the same quarter last year [3] - Upland has beaten the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 29.23% [3] Key Growth Factors - Upland's Q4 performance is likely to benefit from increased customer acquisitions and successful AI integrations [4] - The company's Generative AI solutions contributed to new customer acquisitions and major expansions in Q3 2024, expected to drive growth in Q4 as well [4] Customer Acquisition and Engagement - Upland added 122 new customers in Q3 2024, including 18 major customers, and expanded relationships with 312 existing customers, including 27 major expansions [6] - This momentum is anticipated to contribute to revenue stability and potential growth in Q4 2024 [6] Stock Performance - Upland shares have declined 38% year-to-date, underperforming the broader Zacks Computer & Technology sector's decline of 9.7% and the Zacks Internet - Software industry's decrease of 3.2% [7] Valuation Metrics - Upland stock is considered cheap, with a Value Score of A, trading at a forward 12-month Price/Sales ratio of 0.28X, significantly lower than the industry's 4.20X [11] AI Integration and Partnerships - Upland's integration of generative AI into its solutions has been crucial for attracting new customers and enhancing relationships with existing ones [14] - The company launched Panviva Sidekick, an AI-powered assistant aimed at improving customer experience in complex industries [14][15] - Upland's partnerships with key players like Microsoft and Konica Minolta are expected to drive growth in Q4 [16] Strategic Initiatives - Upland announced the availability of BA Insight for Microsoft Azure AI Search, allowing seamless integration for intelligent content search [17] - The partnership with IBM WatsonX enhances Upland's product capabilities, attracting enterprise customers and addressing data privacy and compliance needs [18] Long-term Investment Perspective - Upland's robust AI portfolio and expanding partner base are seen as attractive for long-term investors [19] - However, the planned runoff of Sunset asset revenue is expected to impact financial performance in Q4 2024, contributing to overall revenue decline [19]