PTC Earnings: A Good Start to Fiscal 2024 Led by Strength in Annual Recurring Revenue

We maintain our $138 per share fair value estimate for narrow-moat PTC after the firm reported strong fiscal-first-quarter results ahead of our forecasts for the top and bottom lines. We were most impressed with the firm’s continued momentum in annual recurring revenue, or ARR, growth, which we view as the leading indicator for business performance. Management reiterated its fiscal 2024 targets, as well as guiding to a sequentially stronger second quarter, driven by expected momentum from its product lifecycle management, or PLM, and service lifecycle management, or SLM, offerings. Despite an unfavorable selling environment and ongoing currency volatility, we are encouraged by the firm’s ARR growth, customer retention, and growing interest in its software-as-a-service offering. We view the stock as overvalued.