Analyst Note| Dan Romanoff, CPA |
Narrow-moat Pegasystems held an investor briefing where the discussion ranged from pending product enhancements, to strategy, to progress on its transition to the cloud. The company has developed momentum with upside to investor expectations for the second quarter and surpassing the halfway point on its path to converting to a cloud model, which we think should continue in the coming quarters. Today’s update gives us more confidence in the medium outlook and we therefore are raising our fair value estimate to $127 per share, from $113. Despite our higher valuation, we see shares as fairly valued. Still, we think a large market combined with improving metrics will be inviting to investors, especially since the company trades a discount to the average software company on a price/sales multiple basis.