Manhattan Associates’ stock heads toward record close as analysts say it could triple revenue over time

The stock of supply-chain software provider Manhattan Associates Inc. was up 8% Wednesday to put it on track for a record close, as analysts weighing in on its fourth-quarter earnings said it could triple revenue over time.

The company

is still in the early innings of a cloud transition that should see revenue reach multiple billions of dollars, which suggests a meaningful uplift to the 2024 revenue guidance of about $1 billion, said Raymond James analysts.

“We understand that valuation conscious investors may struggle with shares that trade at 47x our revised calendar year 2025 free cash flow projection, yet we can’t find many companies at this size with high levels of visibility into potentially tripling the revenue base over the long-term,” analysts led by Brian Peterson wrote in a note to clients.

Raymond James reiterated its outperform rating on the stock and raised its price target by 17% to $250 from $214.

The stock was last trading at $242, which would be a record close, according to Dow Jones Market Data, based on data going back to April 23, 1998.

The stock has gained for three of the past four days and was up almost 16% at its intraday high of $258.91, which it hit early in the session.

The company on Tuesday posted record adjusted per-share earnings of $1.03 for the fourth quarter, up from 81 cents a year ago and well above the 80-cent FactSet consensus. Revenue rose to $238 million from $198.1 million a year ago, and also beat the $238 million FactSet consensus.

The company said it expects 2024 revenue of $1.015 billion to $1.025 billion, or up 9% to 10%. It expects adjusted EPS of $3.69 to $3.79.

“While valuation is commonly a talking point among investors, we remain bullish on long-term financial model implications of rapidly scaling cloud subscription revenue and compounding cash flow along with pronounced upside opportunities,” said Truist analysts led by Terry Tilman.

Truist reiterated a buy rating on the stock and raised its price target to $260 from $240.

Manhattan Associates has posted revenue records for 11 straight quarters and set records for each quarter of the year, said Tilman. Gross margin of 58.2% was above his 53.6% forecast, while the adjusted operating margin of 32.3% was above his 27.2% forecast.

“Manhattan also saw strong demand across its product portfolio, with approximately 1/3 of total bookings coming from new logos in 4Q (management noted that net new potential customers currently represent 35% of pipeline demand), alongside ~75% win rates in the quarter,” said the note.

The cloud contracts won in the quarter included an industrial automation and energy management conglomerate, an airline, a fast-food restaurant chain, a sporting goods retailer, a healthcare and supplies company, a specialty retailer and more.

DA Davidson, which rates the stock at neutral, was also bullish on the numbers, citing a uniquely strong end-market for software. Analyst Gil Luria raised his price target to $220 from $190 and praised “continued execution to bring forth best-in-class supply chain solutions and strong free cash flow.”

The company’s point-of-sale software continues to gain share in a market Luria estimates to be about $10 billion that’s largely dominated by big tech.

“While a marginal contributor to consolidated growth in 2024, we believe POS is compounding momentum and has crossed the threshold from early-stage towards mainstream solution,” the analyst wrote.

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