© Reuters. Pegasystems (PEGA) upgraded at Citi on ‘attractive valuation’
By Sam Boughedda
Pegasystems (NASDAQ:) was upgraded to Buy from Neutral, with its price target lifted to $45 from $36 by Citi in a note on Wednesday. The firm told investors that they believe Pegasystems has an attractive valuation and automation upside.
Pegasystems shares jumped at the open, currently trading 4% above Tuesday’s close.
“We are upgrading shares of PEGA to Buy/High Risk ($45TP) based on our updated estimates accounting for the recently announced RIF, with PEGA now trading at 15x our updated CY24 EV/FCF estimates (24x incl. full litigation expense),” explained Citi.
They added that they see Pega driving increased importance for enterprise automation initiatives after it showed a 10pt increase in priority in its recent CIO survey.
“We’d note the historically PEGA has outperformed in recessionary scenarios, in part due to increased importance in automation and cost savings initiatives,” Citi added. “
“We are raising our profitability outlook for PEGA with below consensus ACV and billings growth estimates and see an attractive FCF valuation with potential upside driven by further automation demand. While concerns may be raised about PEGA’s ability to sustain rep productivity, we believe it carried elevated levels of underperforming reps vs. peers and should see similar growth at a lower expense base.”
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