Analyst Note| Dan Romanoff, CPA |
Narrow-moat Pegasystems reported in-line revenue with better-than-expected profitability for its first quarter as the cloud transition continues to accelerate, which we believe is ultimately better for the company, customers, and investors alike. Management did not provide an update to guidance, but we may see that next week at the investor day. We share management’s optimism that customers will look to streamline their processes in order to navigate the uncertainty from the pandemic, which bodes well for the firm’s digital transformation solutions. We are holding our fair value estimate steady at $157 per share after incorporating results and fine-tuning our model. We see room for upside to our model as we remain below management’s target of $1.6 billion in revenue in 2022. We see the shares as undervalued and continue to think that owning the stock will become easier in the next couple of years thanks to improving accounting optics.