Manhattan Associates Earnings: Impressive Effort Sparks Cloud Excitement; Lifting Fair Value 6%

Narrow-moat Manhattan Associates reported second-quarter results that came in ahead of our expectations. Guidance was similarly good, with both revenue and EPS better than we were modeling for the third quarter based on stellar cloud momentum thus far and a robust services pipeline. We believe Manhattan’s investment in diversifying its offerings and advancing its cloud-native platform will continue to bear fruit, as evidenced by the firm’s impressive win rates. Despite persistent near-term macroeconomic headwinds, we view the firm’s solid bookings and expansion of its workforce to meet increasing demand as signs of strength. Thus, we raise our fair value estimate to $172 from $162. Still, we struggle with valuation for an otherwise high-quality name and would look for better value elsewhere within our coverage.