On Monday, Morgan Stanley (NYSE:MS) initiated coverage on Jamf (NASDAQ:JAMF) Holding Corp. (NASDAQ:JAMF) stock with an Equalweight rating and a price target of $20.00.
The firm's analysis projects that Jamf, a company specializing in Apple (NASDAQ:AAPL) device management, will grow at a compound annual growth rate (CAGR) of approximately 10% in terms of revenue and annual recurring revenue (ARR) over the next two years.
This growth is expected to outpace the core device management market's 7% CAGR, with additional gains anticipated from market share acquisition and the cross-selling of security products.
The financial institution's valuation is based on a 16 times enterprise value to free cash flow (EV/FCF) multiple applied to Jamf's forecasted free cash flow (FCF) for the calendar year 2026. Morgan Stanley's analysts predict that Jamf's reported FCF margin will increase from 6% in 2023 to 21% in 2026, yielding an FCF of $157 million.
The price target reflects a conservative stance compared to the peer group median EV/FCF multiple of around 18 times, factoring in potential risks to estimates and competitive challenges that Jamf may face in the longer term.
Despite these potential risks, the firm suggests that if Jamf achieves growth in line with management's medium-term targets, there could be a greater than 60% upside to the stock price, aligning with the Bull Case scenario outlined by the analysts.
This optimistic view is supported by the potential for a positively skewed risk/reward ratio of approximately 2:1, indicating a favorable balance between possible gains and losses for investors.
Morgan Stanley's coverage on Jamf Holding Corp. offers a measured perspective on the company's financial prospects, considering both the growth opportunities and the challenges that may impact the company's performance in the evolving device management market.
In other recent news, Jamf Holding Corp. reported a 13% year-over-year increase in Q2 revenue, with non-GAAP operating income reaching $23.5 million and annual recurring revenue (ARR) of $621.7 million. The company's security ARR also grew by 27% to $145 million.
For Q3 2024, Jamf projects revenue to range between $156.5 million and $158.5 million, and full-year revenue to be between $622.5 million and $645.5 million.
On the analyst front, BofA Securities maintained a neutral rating on Jamf, citing concerns about recent executive changes and their potential impact on growth. Mizuho maintained an outperform rating on Jamf, while Needham reiterated a buy rating, both firms highlighting the company's competitive position in Apple device management.
In recent developments, Jamf introduced new Apple management tools at its 15th annual Jamf Nation User Conference, including Declarative Device Management and a redesigned Self Service app.
The company also announced key executive changes with Andrew Smeaton appointed as Chief Information Security Officer, and Marc Botham serving as Global Vice President of Channel and Alliances. David Rudow will step in as the new Chief Financial Officer following Ian Goodkind's decision to leave the company.
InvestingPro Insights
Jamf Holding Corp.'s financial metrics and market performance offer additional context to Morgan Stanley's analysis. According to InvestingPro data, Jamf's revenue for the last twelve months as of Q2 2024 stands at $598.41 million, with a revenue growth of 14.6% over the same period. This aligns with Morgan Stanley's projection of a 10% CAGR, suggesting the company is currently outpacing those estimates.
The company's gross profit margin is robust at 79.72%, indicating strong pricing power and efficiency in its core operations. However, the operating income margin of -11.96% suggests challenges in translating top-line growth into profitability, which may explain Morgan Stanley's conservative stance.
InvestingPro Tips highlight two key points:
1. Jamf's revenue growth has been robust, outperforming a significant percentage of global competitors.
2. Analysts expect the company to be unprofitable this year, which aligns with the current negative P/E ratio of -30.36.
These insights complement Morgan Stanley's analysis, particularly regarding the growth potential and profitability challenges. Investors seeking a more comprehensive view of Jamf's prospects can access additional tips through InvestingPro, which offers a total of 14 tips for the company.
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