On Thursday, Rosenblatt adjusted its outlook on PTC Inc. (NASDAQ:PTC) shares, reducing the price target to $190 from the previous $195, while still recommending a Buy rating for the stock.
PTC Inc., a software company, reported second-quarter results that surpassed forecasts, with annual recurring revenue (ARR) climbing by 12% on a constant currency (CC) basis. The company's revenues reached $603 million, exceeding the $575.8 million estimate, and earnings per share (EPS) came in at $1.46, which was ahead of the anticipated $1.16.
PTC's Computer-Aided Design (CAD) division saw an 11% CC increase in ARR, while Product Lifecycle Management (PLM) experienced a robust 13% CC ARR growth. The firm is recognized for its potential to cross-sell Service Lifecycle Management (SLM (NASDAQ:SLM)) solutions within its existing PLM/CAD customer base.
Additionally, PTC is poised for expansion in Application Lifecycle Management (ALM), particularly within the automotive sector, as software becomes increasingly integral to the value of manufactured products. The company is also expected to broaden its core Windchill PLM base through digital transformation initiatives.
Despite the positive performance, PTC has revised its full-year 2024 guidance, now anticipating ARR growth of 11%-13%, a slight decrease from the previously estimated range of 11%-14%.
Revenue growth expectations have also been adjusted to 8%-12%, down from the earlier forecast of 8%-13%. However, the midpoint for the fiscal year 2024 EPS and cash flow projections remains largely consistent, thanks to ongoing efficiency efforts and product line focus.
In light of the challenging macroeconomic conditions, PTC has also revised its mid-term ARR growth outlook, shifting from mid-teens expectations to a low double-digit growth level.
Following the release of the Q2 results and updated guidance, Rosenblatt has recalibrated its valuation of PTC to a fiscal year 2025-2026 basis. While the firm maintains a positive view on PTC's stock with a Buy rating, it anticipates near-term pressure on the stock price.
InvestingPro Insights
PTC Inc. has demonstrated a strong financial performance with a gross profit margin of 79.85% in the last twelve months as of Q2 2024, highlighting the company's efficiency in converting sales into profit. This robust margin is a testament to PTC's operational excellence and is reflected in the company's recent earnings outperformance. With a market capitalization of $20.92 billion and a forward-looking P/E ratio of 69.13, PTC trades at a premium, suggesting that investors are willing to pay a higher price for the anticipated growth and profitability, including the analysts' prediction that PTC will be profitable this year.
InvestingPro Tips indicate that while PTC is trading at high earnings, EBIT, and EBITDA valuation multiples, the company also maintains low price volatility, which may appeal to investors seeking stability in their investments. For those interested in exploring further insights and metrics, there are additional InvestingPro Tips available for PTC at https://www.investing.com/pro/PTC. To access these insights and enhance your investment strategy, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Investors should note that PTC does not pay a dividend, which could be a factor for those seeking regular income streams from their investments. However, the company's high return over the last decade may compensate for the lack of dividend payouts. As you consider PTC's investment potential, keep in mind the company's recent revenue growth of 13.33% in the last twelve months, which underscores its capacity to expand its top-line amidst challenging economic conditions.
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