Bill Holdings Inc. (NYSE:BILL), a cloud-based software company that automates back office operations for small and medium-sized businesses, disclosed over the weekend exposure to Silicon Valley Bank owned by SVB Finance Group (NASDAQ: SIVB).
The Bill.com analyst: CANACCORD Genuity Analyst Joseph Vafi maintained a Buy rating and $175 price target on Bill.com stock.
The Bill.com Assignment: About $475 million of Bill.com’s cash could be at risk out of the $2.7 billion in cash and short-term investments on its balance sheet at the end of 2022, analyst Vafi said. Of the estimated $475 million exposure, $300 million could be the company’s own cash on deposit in the bank, and the remaining $175 million is CANACCORD’s estimate of residual risk in “for the benefit of” customer accounts with SVB, he added.
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The note was issued ahead of the government’s announcement about the backstopping of all SVB deposits.
Even in the worst-case scenario, Bill.com is likely to lose over $500 million of its balance sheet cash, and this is a sharp sting, not a fatal bite by any means, the analyst said.
Bill.com has a large cash balance and is now handsomely profitable, with over $55 million in cash flow from operations in the fourth quarter, he added.
“While we could see some short-term fluctuations in transaction volume, we note that Bill has already moved the ACH processing it did at SVB to other banks,” Vafi said.
The analyst said he expects to see a reduction in buyback activity for the time being if money is lost due to this situation.
“We continue to believe that BILL represents a great way to invest in what remains a large greenfield to enable SMEs to migrate to the world of automated, electronic payments,” the analyst said.
“If there is significant weakness in the share as a result of the SVB situation, we will see this as a buying opportunity.”
Price action: Bill.com stock closed Friday’s session down 14.90%, at $68.35, according to Benzinga Pro data. In premarket trading on Monday, the stock rose 6.82% to $73.01.
Read next: Bill Ackman says the government’s response to SVB’s collapse is not a bailout: “People who screwed up will bear the consequences”
