Jefferies expects that accelerating demand for artificial intelligence-driven fraud prevention will boost shares of Mitek Systems higher. The bank upgraded the software company to a buy rating from hold, calling it “an AI beneficiary that provides fraud, identity, and digital check solutions.” Analyst Surinder Thind also bumped his price target to $15 from $11. Shares of Mitek Systems have popped 14% over the past 12 months. They have added 9% this year. Thind’s new forecast implies further upside of 30%. MITK 1Y mountain MTK 1Y chart Thind’s upgrade comes after Mitek reported its fiscal first-quarter results last Thursday. The company earned an adjusted 26 cents per share in its last quarter, surpassing the 18 cents analysts polled by FactSet had expected. Mitek’s $44.2 million revenue also beat the estimated $42.5 million. “The results of this quarter combined with the growing momentum in the business signals a potential positive inflection in the company’s underlying fundamentals, making current valuation an attractive entry point,” Thind wrote. “Our downgrade of the stock 18 months ago reflected volatile results and near-term uncertainty, but at this point, the traction the Fraud & ID business is experiencing is hard to ignore, especially with synthetic fraud (i.e., AI fraud) on the rise and driving accelerating demand.” The analyst has confidence that Mitek’s Fraud & ID business will grow at a pace in the mid-teens, while the company should grow organically at a high single-digit pace. He also believes that Mitek’s original Check Verification business should benefit from increased digital penetration and stable revenues. “We note the Check Verification business process 1.2B transaction each year, and has upwards of 99% market share, giving it strong pricing power should volumes begin to exhibit any weakness,” he added. “While the Check Verification business is highly profitable, only recently has the Fraud & ID business, after years of investment, become profitable on a fully loaded run-rate basis.” The analyst sees Mitek’s margins growing based on the company’s scaling of its business alongside its careful cost management.
