RBC Capital has increased its price target on Pegasystems Inc . (NASDAQ: NASDAQ:PEGA) to $90 from the previous $77 while reiterating an Outperform rating on the company.
The adjustment came on the heels of Pegasystems reporting robust second-quarter results largely attributed to the Pega Cloud's momentum and bolstered by the significant customer adoption of its Blueprint tool.
Pegasystems' consistent profitability also garnered attention, with the company marking its ninth consecutive quarter of Pega Cloud gross margin expansion, said an analyst from RBC Capital.
The financials showed that the year-to-date free cash flow (FCF) reached $218 million, which is 62% of Pega's $350 million target for 2024. This achievement is seen as a positive step towards de-risking the company's full-year guidance.
The analyst from RBC Capital noted the company's trajectory towards achieving the Rule of 40+, a balance of growth and profitability. Additionally, the firm emphasized Pegasystems' pragmatic approach to Generation Artificial Intelligence (GenAI) strategy and the favorable risk/reward profile as key factors for the raised price target.
InvestingPro Insights
Pegasystems Inc. (NASDAQ: PEGA) has been in the spotlight following RBC Capital's price target update, and the company's recent performance offers some interesting data points for investors. With a market capitalization of $5.86 billion and a P/E ratio of 45.01, Pegasystems trades at a premium based on its earnings. However, looking at the adjusted P/E ratio for the last twelve months as of Q2 2024, which stands at 36.69, the valuation becomes more attractive when factoring in near-term earnings growth.
A notable InvestingPro Tip is that Pegasystems' net income is expected to grow this year, aligning with the company's strong second-quarter results and consistent profitability. This anticipated growth could be a driving factor behind the analyst's optimism and the raised price target.
Another key metric is the company's impressive one-week price total return of 15.52%, which underscores the significant market reaction to its recent developments. This performance, coupled with the fact that the stock is trading near its 52-week high at 96.72% of the peak price, suggests that investors are responding positively to Pegasystems' strategic moves and financial outcomes.
For investors looking for deeper insights and additional analysis, InvestingPro offers a total of 17 InvestingPro Tips for Pegasystems, providing a comprehensive understanding of the company's financial health and market potential. These tips can be accessed by visiting: https://www.investing.com/pro/PEGA. To enhance your investment research, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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