Mulesoft Inc (MULE) Stock Set to Become a Rewarding Investment: Top Analyst

Following a second robust quarterly beat in a row for MULE, Canaccord's Richard Davis now angles for 8% upside potential for shares.


Mulesoft Inc (NYSE:MULE) investors got the best investment gift yesterday- a fourth quarter print that soared beyond Street-wide expectations. In reaction, shares have been sent rocketing 17% in trading today.

Top analyst Richard Davis at Canaccord chimes in with full bullish confidence, noting there really is not room to “poke holes […] here” as far as any bearish items go.

This was a standout quarter for the information technology company, one that leads one of Wall Street’s best performing analysts to maintain a Buy rating on MULE stock while lifting the price target from $30 to $33. Davis’ expectations imply a close to 8% upside from current levels.

For the fourth quarter of 2017, the tech player brought upside to the table on every metric, save for operating income. That being said, this miss Davis deems a “good” one to have in the grand scheme, considering it stemmed from high sales commissions from the outperformance that shone in the latest quarter. The MULE management team established a new $1 billion revenue target for 2021, calculated considering current the company’s current product portfolio coupled with organic gains. By Davis’ calculation, this gives MULE a CAGR of 35% considering the 2018 guide, which offers enticing room to grow throughout the next three to four years. Net dollar retention rose to 119% and the number of customers with $1 million in ACV shot up 50% to 45 since IPO. Partner-sourced bookings also climbed 30% of the mix in 2017.

Considering revenue growth has fired ahead, dollar retention is stepping up, billings jumped 55% for 2017, and customers with over $1 million have surged by half, the analyst sees every reason to be bullish on the tech company.

Bottom line, “This was a second consecutive blowout quarter for Mulesoft, as pretty much every key metric we track moved in the right direction […] On top of that, the firm laid out intermediate-term targets that call for $1B in revenue by 2021, a goal that sets MULE up for a baseline 35% revenue CAGR over the next four years. Mulesoft is a great play on one of the big themes we’ve talked about in software – that the stack is devolving into a layer cake of best of breed apps and tools. As the connective tissue that lets these components share data and talk to each other, as well as with legacy IT investments, there’s a long runway of growth ahead. What’s better is that Mulesoft is not a growth at any price story – the firm has subscription gross margins in the 90’s and will turn a FCF profit in 2018. Sure, a small post-IPO scuffle raised some doubts, but with each subsequent print, we can feel investor confidence building. If we’re right about this and the firm’s prospects, MULE will prove to be a nicely rewarding investment,” Davis contends.

Richard Davis has a very good TipRanks score with a 74% success rate and a high ranking of #7 out of 4,761 analysts. Davis garners 26.8% in his annual returns. When recommending MULE, Davis earns 10.0% in average profits on the stock.

TipRanks indicates strong bullish sentiment swirling around MULE stock. All 4 analysts polled in the last 3 months rate a Buy on Mulesoft stock. With a return potential of 5%, the stock’s consensus target price stands at $32.25.

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