Bullish indicating open at $55-$60, IPO prices at $37
On Monday, Rosenblatt Securities adjusted its price target on Pegasystems (NASDAQ:PEGA) stock, reducing it to $95 from the previous $115, while retaining a Buy rating on the shares. According to InvestingPro data, the company currently trades at a P/E ratio of 57.5x and maintains a market capitalization of $5.7 billion. With analyst targets ranging from $70 to $125, the stock shows potential upside of 41% from current levels. The firm is anticipating the release of Pegasystems’ first quarter financial results for the period ending March 31st, which are scheduled to be announced on Tuesday, April 22nd, after the market closes. A conference call is expected to follow on Wednesday morning at 8 am ET.
The analyst at Rosenblatt, Blair Abernathy, has kept his Q1 estimates for Pegasystems unchanged but has opted to lower the 12-month target price. This adjustment reflects a reevaluation based on comparable company multiples and a modest increase in the discount rate applied. Despite the price target reduction, the firm’s outlook on Pegasystems remains positive, with expectations of a robust approximately 18% growth in Pega Cloud revenue for the fiscal year 2025. InvestingPro analysis reveals strong fundamentals, with a healthy gross profit margin of 74% and a solid Altman Z-Score of 4.35, indicating financial stability.
Abernathy noted that the process automation spending environment for Pegasystems appeared relatively stable during the first quarter, particularly in North America, which accounts for roughly 55% of the company’s revenue. The stable spending is attributed to ongoing Digital Transformation programs among Pegasystems’ customers, many of whom have yet to fully utilize Pegasystems’ offerings. The shift to Pega Cloud, which saw a 21% year-over-year growth in Annual Contract Value (ACV) in the fourth quarter when adjusted for constant currency (CC), is also contributing to the company’s momentum.
Furthermore, Pegasystems is gaining ground with its Pega GenAI Blueprint, which is expected to further stimulate growth. While the price target has been lowered, the sentiment remains bullish, with Rosenblatt affirming its Buy rating at the current price point, signaling confidence in Pegasystems’ ongoing performance and market position. InvestingPro subscribers can access over 10 additional ProTips and a comprehensive analysis of Pegasystems’ financial health, which currently rates as "GOOD" with a score of 2.89 out of 5. The company’s revenue growth of 4.5% and consistent dividend payments for 20 consecutive years further support its stable market position.
In other recent news, Pegasystems has reported a mixed bag of developments that investors should consider. The company achieved a notable milestone by securing the FedRAMP High Authority to Operate (ATO) status for its Pega Cloud for Government, indicating compliance with stringent U.S. federal government cloud security standards. This certification is expected to enhance Pegasystems’ position as a trusted partner in government IT modernization efforts. Meanwhile, Pegasystems’ fourth-quarter earnings report revealed that while revenue exceeded expectations, the Pega Cloud line underperformed, causing Barclays (LON:BARC) to reduce its stock target to $97, maintaining an Equalweight rating.
KeyBanc also adjusted its price target for Pegasystems, lowering it to $94 from $118, though it retained an Overweight rating. Despite broader macroeconomic challenges, KeyBanc expressed confidence in Pegasystems’ ability to maintain strong performance. Additionally, Citizens JMP reiterated a Market Outperform rating for Pegasystems with a $110 price target, reflecting a positive outlook based on the company’s quarterly performance expectations. Pegasystems has also updated its executive compensation plan, setting 2025 targets to align executive interests with shareholder goals. These developments collectively paint a complex picture for Pegasystems, with both challenges and opportunities on the horizon.
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