Analyst Note| Dan Romanoff |
Wide-moat AspenTech reported second-quarter results that fell short of our revenue and profitability expectations, as it focuses on integrating the heritage Aspen; digital grid management, or DGM; and subsurface engineering, or SSE businesses following the Emerson Electric merger. Management remains confident in its outlook for fiscal 2023 and maintained most guidance measures while raising non-GAAP EPS. We believe the firm is well-positioned to capitalize on secular trends and will uniquely benefit from capital-intensive industries facing the dual challenge of meeting increasing resource demand in a sustainable way. We are also encouraged by AspenTech’s steady acquisition momentum, closing in on its Micromine deal. We continue to fine-tune our postmerger model, resulting in a decrease of our fair value estimate to $215 per share from $220. This revision accounts for our caution surrounding recessionary and geopolitical risks, as well as some caution around synergies until we see evidence they are being delivered. With after-hours shares trading around $184, we view the shares as increasingly attractive.