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Magic Software Enterprises Ltd (MGIC)
NASDAQ:MGIC
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Magic
(NASDAQ:MGIC)
Rating:80Outperform
Price Target:
$23.00
▲(13.30% Upside)
Positive Factors
Financial Performance
Magic reported second-quarter results that were above the model on the top and bottom lines.
Revenue Growth
Revenue from Israel increased 18.8% year-over-year as reported, driven by DevOps, Cloud, and robust demand.
Strategic Acquisition
The acquisition of Axiom announced in July brings Magic closer to the U.S. manufacturing sector, an area ripe with digital transformation opportunities.
Negative Factors
Merger Uncertainty
The pending merger with Matrix is now expected to close during the fourth quarter of 2025, slightly later than prior expectations.
Operational Capacity
Second quarter 2025 will include 4.5 fewer billable days compared to the first quarter, equivalent to a roughly 7% reduction in time and material capacity.
Stock Downgrade
As a result of the merger, the stock is downgraded to a Market Perform rating.
Magic (MGIC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$996.72M
Dividend Yield2.77%
Average Volume (3M)43.89K
Price to Earnings (P/E)25.9
Beta (1Y)0.69
Revenue Growth11.98%
EPS Growth14.91%
CountryUS
Employees3,628
SectorTechnology
Sector Strength87
IndustryInformation Technology Services
Share Statistics
EPS (TTM)0.26
Shares Outstanding49,099,304
10 Day Avg. Volume33,613
30 Day Avg. Volume43,894
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
P/FCF RatioN/A
Enterprise Value/Market Cap0.97
Enterprise Value/Revenue1.70
Enterprise Value/Gross Profit6.02
Enterprise Value/Ebitda11.58
Forecast
1Y Price Target
$18.00Price Target Upside-11.33% Downside
Rating ConsensusModerate Buy
Number of Analyst Covering2
Magic Business Overview & Revenue Model
Company DescriptionMagic (MGIC) is a technology company specializing in the development of innovative solutions for the digital marketing space. The company operates primarily in the sectors of mobile marketing, customer engagement, and data analytics. Magic offers a suite of products and services designed to enhance customer interactions and optimize marketing strategies for businesses, including mobile app development, customer relationship management tools, and advanced analytics platforms.
How the Company Makes MoneyMagic generates revenue through a combination of subscription fees, transaction-based fees, and professional service contracts. The company offers tiered subscription plans for its software products, allowing businesses to pay for access to various features based on their needs. Additionally, Magic earns revenue from transaction fees when businesses utilize its platforms for mobile marketing campaigns and customer engagement initiatives. Significant partnerships with major brands and technology providers further enhance its revenue streams by facilitating co-marketing opportunities and expanding its customer base.
Magic Earnings Call Summary
Earnings Call Date:Aug 13, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Nov 17, 2025
Earnings Call Sentiment Positive
The earnings call reflects a strong financial performance with record revenues and significant growth in key regions like Israel and North America, driven by cloud and AI services. Despite some challenges with gross margin and cash flow, the overall outlook remains positive, with an upward revision in revenue guidance.Q2-2025 Updates
Positive Updates
Record-Breaking Revenue
Second quarter 2025 revenue reached an all-time high of $151.6 million, up 11.3% from Q2 2024 and a sequential growth of 2.8%.
Strong Growth in Israeli Operations
Israel delivered a year-over-year growth of 18.8%, with over 90% being organic, primarily due to strong demand for cloud, DevOps, and AI services.
Positive U.S. Market Performance
North American operations showed a 6.5% year-over-year revenue increase, with a 6% sequential rise, driven by agreements executed in late 2024 and early 2025.
High AI Project Success Rate
Managed over 270 projects with a 70% success rate, nearly 6 times higher than the industry average of 12%.
Revised Revenue Guidance
Full-year 2025 revenue guidance revised upwards to $600 million - $610 million, reflecting an anticipated annual growth rate of 8.6% to 10.4%.
Negative Updates
Decrease in Gross Margin
Non-GAAP gross margin for Q2 2025 was 28.7%, down from 29.4% in Q2 2024, primarily due to revenue mix and timing of renewals.
Reduced Cash Flow from Operations
Cash flow from operating activities for the first half of 2025 was $21.2 million, down from $41.4 million in the same period in 2024.
Increase in Financial Debt
Total financial debt increased to approximately $70 million as of June 30, 2025, compared to $60 million as of December 31, 2024.
Company Guidance
During the second quarter of 2025, Magic Software Enterprises reported record revenue of $151.6 million, marking an 11.3% increase from the previous year and a 2.8% sequential growth. The company achieved a non-GAAP gross margin of 28.7%, slightly improved from 28.5% in the first quarter. Revenue from Israeli operations grew by 18.8% year-over-year, driven by strong demand for cloud, DevOps, and AI services, while North American revenue increased by 6.5%. Magic’s AI projects boast a 70% success rate, significantly surpassing the industry average of 12%. Financial expenses decreased from $1.2 million to $700,000, reflecting reduced financial debt. For 2025, Magic revised its revenue guidance to a range of $600 million to $610 million, anticipating an annual growth rate of 8.6% to 10.4%. The board declared a semiannual dividend of $0.296 per share, payable on October 22, 2025.Magic Financial Statement Overview
Summary
Magic demonstrates strong financial health with consistent revenue growth, solid profitability, and effective cash flow management. The company maintains a stable balance sheet with a balanced approach to leverage and a strong return on equity.Income Statement
Magic has demonstrated consistent revenue growth, with a notable increase of 3.01% in the latest TTM period compared to the previous annual report. The company shows strong profitability, with a gross profit margin of 28.3% and a net profit margin of 6.61% for TTM. Both EBIT and EBITDA margins are healthy at 10.99% and 14.72%, respectively, indicating effective cost management and operational efficiency.85
Very Positive
Balance Sheet
Magic maintains a stable balance sheet with a debt-to-equity ratio of 0.3, reflecting a balanced approach to leverage. The equity ratio of 50.45% demonstrates a solid financial structure with significant equity backing. Return on equity stands at 13.97%, which is a strong indicator of profitability relative to shareholder investments.78
Positive
Cash Flow
The company's cash flow is robust, with a strong operating cash flow to net income ratio of 1.64, indicating effective cash generation from operations. Free cash flow remains healthy at $57.56 million, although there is a 21.31% decrease compared to the previous period. However, the free cash flow to net income ratio of 1.53 still highlights solid cash flow management.82
Very Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 569.14M | 552.52M | 535.05M | 566.79M | 480.32M | 371.19M |
| Gross Profit | 161.11M | 157.18M | 152.99M | 155.35M | 132.99M | 109.59M |
| EBITDA | 83.77M | 82.06M | 82.27M | 82.20M | 74.47M | 55.62M |
| Net Income | 37.65M | 36.88M | 37.03M | 40.47M | 29.77M | 25.19M |
Balance Sheet | ||||||
| Total Assets | 534.11M | 540.33M | 522.41M | 510.97M | 492.05M | 443.32M |
| Cash, Cash Equivalents and Short-Term Investments | 105.02M | 120.40M | 106.69M | 86.97M | 94.82M | 89.65M |
| Total Debt | 82.12M | 86.15M | 108.72M | 79.79M | 62.10M | 49.40M |
| Total Liabilities | 241.07M | 239.26M | 231.46M | 205.70M | 185.94M | 149.34M |
| Stockholders Equity | 269.41M | 277.19M | 265.98M | 263.65M | 265.25M | 260.43M |
Cash Flow | ||||||
| Free Cash Flow | 57.56M | 73.16M | 64.19M | 41.86M | 35.86M | 46.22M |
| Operating Cash Flow | 61.72M | 74.83M | 68.99M | 49.52M | 40.49M | 52.30M |
| Investing Cash Flow | -25.75M | -22.61M | -27.62M | -27.34M | -18.45M | -9.60M |
| Financing Cash Flow | -58.19M | -45.15M | -17.29M | -18.35M | -21.27M | -39.65M |
Magic Technical Analysis
Positive
20.30
Price Trends
20.22
Positive
17.48
Positive
14.78
Positive
Market Momentum
0.07
Negative
51.32
Neutral
59.15
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MGIC, the sentiment is Positive. The current price of 20.3 is above the 20-day moving average (MA) of 20.14, above the 50-day MA of 20.22, and above the 200-day MA of 14.78, indicating a bullish trend. The MACD of 0.07 indicates Negative momentum. The RSI at 51.32 is Neutral, neither overbought nor oversold. The STOCH value of 59.15 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MGIC.
Magic Risk Analysis
Magic disclosed 47 risk factors in its most recent earnings report. Magic reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Magic Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
83 Outperform | $796.65M | 13.68 | 28.20% | ― | 12.51% | 390.09% | |
80 Outperform | $996.72M | 25.92 | 14.04% | 2.77% | 11.98% | 14.91% | |
72 Outperform | $1.61B | 319.95 | 0.86% | ― | 22.20% | ― | |
66 Neutral | $701.91M | 40.94 | 3.69% | ― | 22.27% | ― | |
61 Neutral | $35.43B | 7.71 | -10.08% | 1.88% | 8.71% | -9.18% | |
61 Neutral | $572.77M | 34.77 | 15.27% | 2.21% | 4.18% | -51.62% | |
58 Neutral | $837.19M | 39.11 | -5.88% | ― | 0.47% | -292.07% |
* Technology Sector Average
Performance Comparison
MGIC
Magic
20.30
10.10
99.02%
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20.82
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-18.80%
CTLP
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10.87
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GDYN
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8.29
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-38.41%
PSFE
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14.11
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-34.98%
FLYW
Flywire
13.15
-4.74
-26.50%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.