Pegasystems (PEGA – Research Report), the Technology sector company, was revisited by a Wall Street analyst today. Analyst Kevin Kumar from Goldman Sachs maintained a Hold rating on the stock and has a $70.00 price target.
Kevin Kumar’s rating is based on a thorough analysis of Pegasystems’ current financial status and future outlook. In his assessment, Kumar notes that while Pega’s total Annual Contract Value (ACV) growth, excluding foreign exchange impacts, was slightly higher than the market anticipated, there was an underperformance in term license revenue which led to a minor shortfall in total revenue for the quarter. Despite this, the top-line results aligned with management’s expectations. Kumar projects ongoing weakness in term license revenue as Pegasystems’ new GenAI capabilities encourage a shift towards cloud services. However, he anticipates that ACV growth could see a modest increase in the second half of the year, leveraged by the timing of enterprise renewal cycles and more favorable year-over-year comparisons.
Kumar also highlights the expansion of cloud gross margins and a significant overperformance in Free Cash Flow (FCF) compared to street expectations, crediting it to a robust collections quarter. Although full-year guidance remained unchanged, he sees potential for upward revisions, particularly as the fourth quarter typically boasts the strongest FCF. Pegasystems is expected to experience a pivot in growth trends as it capitalizes on new product cycles and extends the benefits of its Launchpad and Blueprint/GenAI features into 2025 and beyond. Kumar believes that the company is making steady progress in sales productivity and margin expansion and predicts that it will approach the ‘Rule of 40′ benchmark by the end of 2024, a metric that combines ACV growth and FCF margin. Consequently, he maintains a Neutral rating with a price target of $70 for Pegasystems’ stock.
Based on the recent corporate insider activity of 63 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of PEGA in relation to earlier this year.
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Pegasystems (PEGA) Company Description:
Pegasystems, Inc. engages in the development, market, license, and support of software, which allows organizations to build, deploy, and change enterprise applications. The company was founded by Alan Trefler in 1983 and is headquartered in Cambridge, MA.
