Pegasystems Earnings: Pega Cloud Adoption Is Good, While 2024 Is More Back-End-Loaded

We maintain our $65 fair value estimate for no-moat Pegasystems after the firm reported first-quarter results below both our own expectations and FactSet consensus. While weak term license sales weighed on top-line growth in the quarter, we are encouraged with the strong momentum in Pega Cloud. We think the firm's artificial intelligence investments will enable long-term growth by creating more use-cases and thereby greater customer adoption for the Pega platform. Management made no changes to its 2024 outlook, leaving our near-term estimates intact. We see some upside to shares but continue to prefer our wide-moat names with less controversy.