Pegasystems delivered lower-than-expected results in the fourth quarter. However, the software provider issued a strong 2021 outlook.
Pegasystems (PEGA) posted earnings per share (EPS) of $0.18 during the fourth quarter, which were lower than analysts’ expectations of $0.22. Revenue increased 8% year-on-year to $298.6 million but missed analysts’ estimates of $313 million. Revenue growth was primarily attributable to a 56% increase in Pega Cloud sales and a 23% gain in subscription revenue.
For fiscal 2020, the company generated sales of $1.02 billion, up from the $911.4 million posted in 2019. Diluted loss per share came in at $0.37 versus a loss per share of $0.44 in the comparable year-ago period.
Pegasystems CFO Ken Stillwell said, “Pega Cloud gross margins expanded from 51% to 63%. We expect Pega Cloud revenue growth acceleration and gross margin expansion will be key contributors to drive future Pega profitability and growth.”
Looking ahead to fiscal 2021, Pegasystems expects to generate $1.25 billion in revenues, topping the $1.21 billion expected by analysts. Net earnings per share are forecasted to land $0.25, compared to the Street consensus of $0.16. (See Pegasystems stock analysis on TipRanks)
Macquarie analyst Frederick Havemeyer recently initiated the stock’s coverage with a price target of $151 (6.5% upside potential) and a Buy rating. Havemeyer said, “Pegasystems is at the start of the re-acceleration phase of its subscription transition and also positioned to benefit from accelerated, cloud first digital transformation trends.”
The analyst believes that, “Pegasystems’ valuation can move higher as the company shows the ability to address a wide range of digital transformation and automation needs.”
According to TipRanks’ Smart Score system, Pegasystems gets a 7 out of 10, which indicates that the stock is likely to perform in line with market averages.
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