Rosenblatt has maintained a positive stance on Pegasystems (NASDAQ: NASDAQ:PEGA), reiterating a Buy rating and a price target of $90.00.
The firm's outlook is based on expectations for the company's third-quarter results for the period ending September 30th, anticipated to be released around October 23rd, after the market closes.
Rosenblatt has made slight revisions to its forecasts for Pegasystems for the fiscal years 2024 and 2025. The firm cites a relatively stable process automation application spending environment in North America, which accounts for approximately 55% of Pegasystems' revenue.
The analyst points to ongoing Digital Transformation programs among Pegasystems' existing customers, many of whom have not fully utilized the company's offerings, as a key driver of growth.
The transition to Pega Cloud is also highlighted as a significant factor, with the cloud segment's Annual Contract Value (ACV) having increased by 19% year-over-year in the second quarter, now representing 45% of the Total ACV. Pegasystems' workflow automation initiatives, bolstered by the increasing traction with Pega GenAI Blueprint, are expected to contribute to the company's performance as well.
In other recent news, Pegasystems Inc . has experienced a series of significant developments. The company announced robust financial results, with a 13% year-over-year increase in annual contract value (ACV), exceeding $1.3 billion. The company's free cash flow also reached $218 million, a substantial 62% of Pega's $350 million target for 2024.
On the legal front, the Virginia Court of Appeals overturned a previous $2 billion verdict against Pegasystems, leading to a new trial. This development has led to several analyst upgrades. Loop Capital, JMP Securities, JPMorgan, and RBC Capital have all raised their price targets for Pegasystems.
In terms of market analysis, William Blair upgraded Pegasystems shares from Market Perform to Outperform, while Loop Capital upgraded the stock to Buy from Hold. JMP Securities moved its rating from Market Perform to Market Outperform, and JPMorgan maintained its Overweight rating while raising the price target.
InvestingPro Insights
Pegasystems' financial metrics and market performance align well with Rosenblatt's optimistic outlook. According to InvestingPro data, the company's revenue growth stands at 15.43% over the last twelve months, with a notable 17.73% quarterly growth in Q2 2024. This robust growth supports the analyst's positive view on Pegasystems' ongoing Digital Transformation programs and cloud transition.
InvestingPro Tips highlight that Pegasystems is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.24. This suggests that the stock may be undervalued considering its growth prospects, potentially supporting Rosenblatt's $90 price target.
The company's strong financial health is further evidenced by its ability to maintain dividend payments for 19 consecutive years, as noted in another InvestingPro Tip. This consistency in shareholder returns, coupled with a high return of 63.59% over the last year, underscores the company's solid market performance.
For investors seeking more comprehensive analysis, InvestingPro offers 13 additional tips on Pegasystems, providing a deeper understanding of the company's financial position and market potential.
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