Aspen stock rises after Baird upgrades to Outperform

Aspen Technology (NASDAQ:AZPN) stock rose about 5% on Tuesday after Baird upgraded the shares to Outperform from Neutral citing limited downside.

The firm also raised the price target on the stock to $202.

The analysts said that, with shares having fallen about 28% since third quarter fiscal 2023 results in late April, verus S&P 500 +9%, and valuation at low end of historical range, they think the stock discounts concerns around the achievability of FY'24 Annual contract value, or ACV, guidance (at least +11.5%) and integration with Emerson Electric's (EMR) industrial software businesses.

After hosting an investor meeting with Aspen's management, the analysts came out incrementally positive on FY'24 outlook for the EMR businesses and cross-sell. While too early in FY'24 to express full confidence in the guidance, they are more sanguine post meeting.

The analysts noted that while Aspen (AZPN) is not "out of the woods" regarding macro and Emerson integration/transformation, they see compelling valuation, strong franchise, and their own incremental comfort with the EMR assets and cross-sell for FY'24 post meeting as giving comfort that current level represents a buying opportunity.

The analysts noted that while there are many uncertainties that could still impact FY'24 ACV outlook, they came away with a sense that management had guided prudently and that EMR asset improvement represents possible upside/offset.

In addition, the analysts think Aspen is in a better spot in FY'24 relative to EMR than it was previously, which should be reflected in their financial performance.

Aspen has a Buy rating at Seeking Alpha's Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors' (2 authors in this case) average rating is Hold so is the average Wall Street analysts' rating.