Needham analyst Ryan MacDonald upgraded Yext, Inc. (NYSE:YEXT) to Buy from Hold, with a price forecast of $8.

Yext shares are trading higher after the company reported better-than-expected second-quarter adjusted EPS results and issued FY25 revenue guidance above estimates.

The analyst notes that the results clarified the business's fundamental trajectory following the recent Hearsay acquisition.

MacDonald sees significant potential for margin expansion over the next 12-18 months, despite initial dilution from the Hearsay acquisition.

While topline growth remains a concern, Yext's updated outlook for 2H25 is viewed as appropriately conservative. Cross-sell opportunities could drive organic growth acceleration in FY26.

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Improving execution is stabilizing the business despite a challenging selling environment. Total annual recurring revenue declined by 4% year-over-year to $381.8 million. However, direct annual recurring revenue showed its first sequential improvement in a year, increasing from $312.1 million in the first quarter to $313.4 million.

This positive change comes amidst ongoing commentary about prolonged sales cycles and a cautious spending environment, the analyst adds.

Yext has highlighted improved efficiency with an increased adjusted EBITDA guidance, while maintaining conservative topline expectations. Following the completion of the Hearsay acquisition on August 1st, Yext management has updated the FY25 outlook to include an estimated $30 million contribution from the newly acquired asset.

Price Action: YEXT shares are trading higher by 13.3% to $5.575 at last check Thursday.

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