Bullish indicating open at $55-$60, IPO prices at $37
On Friday, Citi analysts raised the price target for Pegasystems stock (NASDAQ: NASDAQ:PEGA) to $131 from $116, maintaining a Buy rating. The stock, which has delivered an impressive 75% return over the past year and currently trades at $101.84, has caught analysts’ attention. The revision follows Pegasystems’ recent investor day, where the company updated its guidance, including a $100 million increase in revenue and an $0.84 rise in EPS estimates. According to InvestingPro data, 7 analysts have recently revised their earnings estimates upward for the upcoming period.
The analysts highlighted Pegasystems’ focus on its GenAI capabilities, with growing adoption of its Blueprint product and emerging use cases aimed at transforming traditional workflows. The firm is also emphasizing new customer opportunities through simplified mid-market packaging. This strategy appears to be paying off, with the company maintaining impressive gross profit margins of 76% and achieving 14% revenue growth in the last twelve months.
Citi’s analysts noted the company’s medium-term guidance framework, projecting $2 billion in annual contract value by 2027 and over $700 million in free cash flow by 2028. These projections have led to the revised price target as the valuation is rolled forward to 2027, with a 22x free cash flow estimate.
Pegasystems is trading at 13.6x its 2028 price-to-free cash flow estimate, discounted back at 12%, according to the analysts. They continue to see value in the company’s stock, considering the current trading metrics.
In other recent news, Pegasystems has made significant strides in its financial and strategic outlook. The company announced an increase in its fiscal year 2025 revenue guidance, raising it by approximately 6% to $1.7 billion, reflecting a year-over-year growth of 13.6%. This adjustment follows a strong first-quarter performance and increased confidence in its business pipeline, as highlighted during its PegaWorld conference. Analysts from Rosenblatt and Needham have both raised their price targets for Pegasystems to $112, maintaining their Buy ratings, citing the company’s AI-related product announcements and strategic initiatives as key drivers. Meanwhile, DA Davidson also adjusted its price target to $95, maintaining a Neutral rating, noting the strategic importance of Pegasystems’ Blueprint tool. William Blair reiterated an Outperform rating, emphasizing the company’s expanded target market, now including over 10,000 companies, and ambitious growth targets for annual contract value and free cash flow. KeyBanc also maintained an Overweight rating, expressing confidence in Pegasystems’ ability to leverage efficiency gains to secure new clients and expand margins. Overall, these developments highlight Pegasystems’ focus on growth and innovation amid broader economic challenges.
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