Oppenheimer has maintained an Outperform rating on Progress Software (NASDAQ: NASDAQ:PRGS), increasing the price target to $80 from $70.
The firm anticipates the company to surpass its fourth-quarter sales guidance of $207-$217 million, which would represent a 19.5% year-over-year increase compared to the 1.7% rise in the third quarter. Analysts project sales to outdo both the company's guidance and the consensus estimate of $211.7 million.
The expectation of a steady quarter is based on stable demand for Progress Software's portfolio, which has been performing slightly above the company's internal expectations.
The analyst highlighted the contribution of ShareFile, forecasting an $18-20 million revenue boost from the acquisition, equating to approximately an 11-point growth for the fourth quarter. This estimate is based on the closure of the acquisition deal by early November.
Looking ahead to fiscal year 2025, ShareFile is expected to significantly drive revenue growth. Projections now include nearly 30 points of incremental revenue growth, with an estimated $240 million in additional revenue, bringing the total to $981 million. This is a substantial increase from the previous estimate of $741 million.
In terms of profitability, conservative guidance is anticipated for margins, with a 36% operating margin seen as the baseline. This takes into account the current margin profile of ShareFile, which ranges between 15-20%. However, there is an expectation for Progress Software to realize significant cost synergies throughout the year.
In other recent news, Progress Software Corporation has exceeded Q3 expectations with a 2% year-over-year increase in revenue, reaching $179 million, and a 17% growth in earnings per share to $1.26. The company also announced the planned acquisition of ShareFile from Cloud Software Group for $875 million, which is expected to finalize by the end of fiscal 2024 and contribute between $18 million and $20 million to Q4 revenue.
Citi, maintaining a Neutral rating on the stock, has increased the price target for Progress Software to $65.00 from the previous $60.00, citing the company's disciplined cost management and timing of expenses that resulted in increases in operating profit margin and free cash flow margin.
On the product side, Progress has launched an enhanced Flowmon platform, designed to expedite IP searches by up to ten times, aiding network administrators in quickly identifying network activities linked to specific IP addresses. This development is part of a series of major performance and scalability enhancements to the Flowmon AI-powered Network (LON:NETW) Detection and Response & Network Visibility offerings.
InvestingPro Insights
Recent data from InvestingPro adds depth to Oppenheimer's optimistic outlook on Progress Software (NASDAQ:PRGS). The company's market capitalization stands at $2.81 billion, with a P/E ratio of 29.45 based on the last twelve months as of Q3 2024. This valuation reflects the market's positive expectations, aligning with Oppenheimer's raised price target.
InvestingPro Tips highlight Progress Software's impressive gross profit margins, which are supported by the data showing a gross profit margin of 86.28% over the last twelve months. This robust profitability metric underscores the company's operational efficiency, a key factor in Oppenheimer's confidence in the company's ability to realize cost synergies from the ShareFile acquisition.
Additionally, InvestingPro data reveals a strong revenue growth of 6.05% over the last twelve months, with the company generating $715.42 million in revenue. This growth trajectory supports Oppenheimer's expectation of Progress Software surpassing its fourth-quarter sales guidance.
It's worth noting that InvestingPro offers 13 additional tips for Progress Software, providing investors with a comprehensive analysis of the company's financial health and market position. These insights can be particularly valuable as the company integrates ShareFile and aims for significant revenue growth in fiscal year 2025.
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