Analyst Note| Dan Romanoff, CPA |
Narrow-moat Manhattan Associates reported strong fourth-quarter results on the top and bottom lines, exceeding FactSet consensus estimates, and raised its 2021 outlook to be slightly ahead of consensus. Management indicated strong interest in the recently released active warehouse management solution, which is the flagship product re-engineered for the cloud. The overall pipeline is growing and has quickly become 90% cloud. Additionally, 40% of the pipeline is from net new customers. We view these as strong indicators of the underlying health of the business. In support of these data points, RPO, the best proxy for cloud revenue performance, was up 20% sequentially and 80% year over year, indicating accelerating momentum. Continued quarterly outperformance, achievable and increasing guidance, a robust pipeline, and cloud traction combine to give us confidence in the company’s trajectory over the next several years. In conjunction with our annual model roll forward, these factors drive our fair value estimate to $90 per share from $73. Still, we think investors should wait for a better entry point.