Manhattan Issues Promising Outlook as Cloud Offerings Drive Growth; Raising FVE to $127

Narrow-moat Manhattan Associates reported strong third-quarter results that came in nicely ahead of both guidance and our own revenue and adjusted EPS expectations. Management again raised guidance for fiscal 2021 as active transportation management gains traction and active warehouse management continues to experience accelerating growth. We see the move to the cloud across the portfolio combined with permanently changed consumer shopping patterns and a writhing supply chain as a perfect storm for Manhattan to uniquely benefit. While we have maintained a conservative view on Manhattan’s ability to drive margin expansion apace top line growth over the course of the model transition to the cloud, we consider the newly issued multiyear and detailed financial targets as very helpful and appropriate amidst the secular alignment of its cloud solutions with evolving consumer demands. As a result, we are raising our fair value estimate to $127 per share, from $107, but still recommend investors wait for a better entry point for the stock.