Manhattan Associates Earnings: Cloud Momentum Drives Strong Finish to Close Out 2023

Narrow-moat Manhattan Associates reported fourth-quarter results that came in ahead of our expectations, thanks to strong cloud and services revenue performance. Management also raised its guidance for 2024 and expects higher top-line growth and a higher adjusted operating margin than previously expected. The firm continues to find success in migrating its customers to the cloud, which in turn also increases services revenue and ultimately results in operating leverage as its cloud business scales. We continue to believe that Manhattan’s focus on growing its cloud-native platform in terms of customers and capabilities is a wise decision, backed by high win rates, increasing remaining performance obligation, or RPO, and evidence of operating leverage. Based on results and guidance, we have increased our estimates and are raising our fair value estimate to $195 from $172 per share. However, we view shares as overvalued after the recent runup in the stock.