Analyst Note| Julie Bhusal Sharma |
Wide-moat Ansys’ first quarter was a standout, exceeding management’s guidance on all counts, including annual contract value, due largely to unforeseen strength in small and medium business customers. Increased confidence in the SMB recovery led Ansys to up its guidance for the remainder of the year. With our own incremental confidence in Ansys’ SMB revenue and long-term trajectory, we think the company can reach the high end of its top- and bottom-line guidance for the year. Consequently, we are raising our fair value estimate for the application software powerhouse to $237 per share from $230. Although the shares were down 6% after the results in what we see as a slight correction, we believe they are still significantly overvalued as we suspect the market is factoring in a premium for Ansys’ high-quality, moaty nature.