On Thursday, Piper Sandler adjusted its price target for PTC Inc. (NASDAQ: NASDAQ:PTC), a software company, increasing it to $182 from the previous target of $177 as the firm retained a Neutral rating on the stock.
The adjustment follows PTC's third fiscal quarter report, which showed a continual annual recurring revenue (ARR) growth of approximately 12% on a constant-currency basis. This performance was slightly above the guided midpoint.
Despite a reduction of $20 million at the high end of the fourth fiscal quarter ARR forecast, PTC has maintained its free cash flow (FCF) projection for fiscal year 2024 at $725 million.
PTC's results were noted to demonstrate resilience amidst a challenging economic environment, particularly when compared to its peers.
Looking further ahead, PTC's management provided an informal forecast for fiscal year 2025, anticipating low double-digit ARR growth and expecting to achieve a free cash flow target range between $825 million and $875 million.
Additionally, the company plans to recommence share repurchase programs in fiscal year 2025, with an estimated $300 million in buybacks.
The revised price target of $182 is based on slightly updated estimates incorporated into a five-year discounted cash flow (DCF) model. The model projects a high-teens free cash flow per share compound annual growth rate (CAGR) through fiscal year 2028, reaching approximately $11 per share, with a discount rate of 10%.
InvestingPro Insights
As Piper Sandler updates its stance on PTC Inc., investors and analysts alike keep a keen eye on the company's financial metrics and market performance. According to InvestingPro data, PTC Inc. boasts a robust gross profit margin of nearly 80% for the last twelve months as of Q2 2024, indicating the company's ability to maintain profitability in its operations. This aligns with the InvestingPro Tip highlighting PTC's impressive gross profit margins, which could be a contributing factor to Piper Sandler's positive outlook.
The company's market capitalization stands at $21.3 billion, reflecting its significant presence in the software industry. However, PTC trades at a high earnings multiple, with a P/E ratio of 74.05, suggesting that investors are willing to pay a premium for its earnings potential. This is further substantiated by a high Price / Book multiple of 7.24, pointing towards a market valuation that exceeds the company's net asset value.
InvestingPro also notes that PTC has experienced a revenue growth of 13.33% over the last year, which may underpin the company's anticipated low double-digit ARR growth for fiscal year 2025. It's worth mentioning that there are additional InvestingPro Tips available for PTC Inc. that could provide investors with deeper insights into the company's performance and outlook. For those interested in exploring these further, a total of 13 additional tips are listed on InvestingPro's platform.
In summary, the data and tips from InvestingPro suggest that PTC Inc. is positioned as a profitable company with strong profit margins, albeit trading at higher valuation multiples. This information could be valuable for investors considering Piper Sandler's revised price target and PTC's financial projections.
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