Top Analyst Correctly Predicted Negative Reaction to Anaplan (PLAN) Earnings; Remains Bullish Long Term


Ahead of Anaplan’s (PLAN) second-quarter earnings release Tuesday morning, Wall Street’s #1 analyst Richard Davis expected strong numbers, but also for the stock to respond negatively. And he was right. 

While quarterly revenue came in 46% higher than last year, and loss per share came in better than expected, Anaplan shares declined about 10% since the earnings release. However, the stock is still up about 90% year-to-date, and Davis believes there is more room for upside than downside from here.

As a result, Davis maintains a Buy rating on Anaplan stock, while raising his price target to $65 (from $50), which implies over 20% upside from current levels. 

As always, we like to give credit where credit is due. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Davis has delivered to his followers a yearly average return of 46.9% with a 85% success rate. Davis has earned an average return of about 100% when recommending PLAN and is ranked #1 out of 5,255 analysts. (To watch Davis’ stocks list, click here)

Davis calls his Anaplan preview “spot on,” as shares fell even as the company beat expectations. In his preview, the analyst cautioned investors that the “stock is coming into the print a bit hot,” making it “hard to judge the really short-term balance between obviously high expectations and what good results the firm is likely to deliver.” 

But even with the pullback, Davis advises investors to “ignore the fade and buy the stock because Anaplan has plenty of gas left in the tank.” He believes that the company is competing against “weaklings,” as its “primary competition is an Excel spreadsheet…or truly ancient systems now owned by legacy platform firms.” 

Though Davis believes Anaplan has a strong hold in its market, in his preview, he brought attention to Workday’s play into the space. He said the encroachment would cause some investors to “fret,” but maintained that the market is large enough for both companies to succeed in. After earnings, he reiterated this, saying it is “nonsensical to assume that connected planning will be a single vendor market – for either vendor.” Overall, and notwithstanding competition from Workday, Davis calls Anaplan a “top pick” as he believes the company is “likely to grow rapidly, but also beat forecasts.”

All in all, the analyst community doesn’t see the recent stock decline as a major concern. TipRanks analysis of nine analyst ratings showing a consensus Moderate Buy rating, with six analysts rating Buy and three suggesting Hold. The average price target on the stock stands at $62, suggesting the stock has room to beef up, by 15% or so. (See PLAN’s price targets and analyst ratings on TipRanks)

 

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