Bullish indicating open at $55-$60, IPO prices at $37
On Wednesday, KeyBanc Capital Markets adjusted its price target for Pegasystems (NASDAQ:PEGA) stock, reducing it to $94 from the previous $118 while maintaining an Overweight rating. Currently trading at $69.66, the stock sits between analyst targets ranging from $70 to $125. The revision reflects a recalibration due to the recent downturn in software stock valuations, coupled with a more precise accounting of near-term Annual Contract Value (ACV) and Free Cash Flow (FCF) linearity. According to InvestingPro data, PEGA trades at relatively high multiples, with several key valuation metrics suggesting premium pricing.
Devin Au of KeyBanc highlighted the impact of broader macroeconomic factors, including tariffs and currency fluctuations, on the software industry. Despite these challenges, the analyst expressed confidence in Pegasystems’ ability to continue its strong performance, particularly in expanding its existing customer base and capitalizing on the momentum of its GenAI BluePrint. InvestingPro analysis indicates the company maintains good financial health with a solid 3.47 profit score, while demonstrating moderate leverage with a debt-to-equity ratio of 0.94.
Pegasystems is expected to deliver first-quarter constant currency ACV and FCF figures that align closely with KeyBanc’s projections of $1,408.5 million and $183.5 million, respectively. These estimates are in line with the consensus figures of $1,411.3 million for ACV and $187 million for FCF. With earnings scheduled for April 22, investors can access comprehensive analysis and forecasts through InvestingPro’s detailed research reports, which cover over 1,400 US stocks.
Looking ahead to the rest of 2025, while Pegasystems typically does not update its full-year guidance quarterly, KeyBanc anticipates the company will offer qualitative insights into the composition of ACV and cash flow for the remainder of the year, given the current economic environment.
KeyBanc’s analysis suggests that despite the increasingly challenging macroeconomic landscape, Pegasystems’ improved execution positions the company to sustain at least mid-teens FCF growth in the short to medium term. With the stock trading at a significant discount compared to its peers, the firm sees an attractive risk-reward proposition for investors.
In other recent news, Pegasystems Inc . reported strong fourth-quarter earnings for 2024, with earnings per share of $1.61, surpassing Wall Street’s expectations of $1.47. The company’s revenue also exceeded forecasts, reaching $490.83 million against an anticipated $468.36 million. This performance was driven by a robust 21% growth in Pega Cloud Annual Contract Value (ACV). Despite these positive results, Barclays (LON:BARC) adjusted its outlook on Pegasystems, reducing the stock price target to $97 while maintaining an Equalweight rating, due to mixed quarterly outcomes and concerns over the Pega Cloud line’s performance. Meanwhile, DA Davidson raised its price target for Pegasystems to $90, highlighting the company’s strategic market approach despite a slowdown in ACV growth. Pegasystems also achieved the FedRAMP High Authority to Operate status for its Pega Cloud for Government, enhancing its position as a partner for government IT modernization. Additionally, the company updated its executive compensation plan, setting new targets for 2025, as detailed in a recent SEC filing.
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