PTC Earnings: Strong ARR Growth and Momentum Building; Valuation Raised to $138 from $125

Narrow-moat PTC finished its fourth quarter of fiscal 2023 with results slightly below our estimates for both the top and bottom lines. However, more relevant is its solid annualized recurring revenue growth which we view as a better indicator of the firm’s business performance. PTC’s outlook for fiscal 2024 was above our expectations on the top line, and management raised its ARR guidance as PTC builds product momentum, particularly from its Windchill and Codebeamer offerings. Difficult macroenvironment and foreign exchange volatility figures are likely to persist throughout fiscal 2024, but we are encouraged by PTC’s ARR growth, customer retention, and interest in its software-as-a-service offering. When rolling our model forward and adjusting our fiscal 2024 assumptions, we are increasing our fair value estimate to $138 per share from $125 per share, leaving the stock as fairly valued.