Pegasystems shares rose Monday as Wedbush analysts added the enterprise software company to its Best Ideas List.
The firm also maintained its Outperform rating and $65 price target. Shares of Pegasystems climbed nearly 3% Monday afternoon to $52.29.
“We see a compelling risk/reward in shares at current levels,” analysts wrote. “As we have spoken to a handful of our checks recently we believe the Pega growth story and business model turnaround is now in motion with last week's June results a step in the right direction despite the knee jerk negative reaction post print.”
Pegasystems reported an annual contract value of $1.16 billion, up 13% year-over-year and in line with the consensus Street estimate. Cloud annual contract value was $498.4 million, topping the Street's estimate of $494 million thanks in part to the company’s transition to subscription-based pricing, the analysts noted.
“We view PEGA as an under-the-radar AI play as Pega is automating processes for enterprises driving faster time-to-value, reduced implementation times, and improved sales cycles,” analysts wrote.
“The company continues to increase value with existing customers while Pega’s model stabilizes leading to more recurring revenue and higher gross margins driven by Pega Cloud as the company continues down the path of becoming a Rule of 40 company.”
The Rule of 40 is a brief that a software company's revenue growth rate and profit margin should combine to equal or exceed 40%.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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