On Friday, Piper Sandler showed a positive outlook on shares of Tyler Technologies Inc . (NYSE:NYSE:TYL) by increasing its price target on the stock to $701 from the previous $625. The firm maintained its Overweight rating on the shares of the company. The adjustment reflects Tyler Tech's successful expansion of its sales funnel and its growth in software-as-a-service (SaaS) arrangements with its largest customers.
Tyler Tech has been making significant strides in its business operations, with an impressive 96% of its new total contract value (TCV) booked year to date being subscription-based. The company has seen a 57% increase in migration annual recurring revenue (ARR) bookings year to date. This growth is attributed to a strategic shift towards transactions that promise faster cash cycles and some notable prepayments.
The company's financial outlook for fiscal year 2024 has been revised upwards, with the midpoint of its free cash flow (FCF) margin now set at 22%, which is 3 percentage points higher than previous estimates. This revision is ahead of Tyler's planned FCF margin for 2025, indicating a stronger than expected financial performance.
Tyler Tech's transition to a cloud-first approach and its ongoing shift to SaaS are accelerating, as evidenced by the company's current performance and projections. Piper Sandler expressed increased confidence in Tyler Tech's ability to meet its 2030 objectives and financial targets ahead of schedule.
The firm's decision to raise the price target to $701 is based on the company's robust sales funnel, its successful SaaS transition, and the anticipated early achievement of long-term financial goals. Tyler Tech's commitment to SaaS and cloud-first strategies appears to be paying off, leading to a more optimistic valuation by Piper Sandler.
In other recent news, Tyler Technologies reported strong third-quarter earnings and revenue growth, primarily driven by its Software-as-a-Service (SaaS) offerings. Total revenues rose to $543.3 million, marking a 9.8% increase year-over-year. Subscription revenue and SaaS revenues also saw significant increases of 17.6% and 20.3% respectively, while new software bookings surged 78% to $105.6 million.
Baird, a global financial services firm, raised Tyler Tech's price target to $700, citing the company's successful transition to a business model that delivers enhanced value. The firm also noted Tyler Tech's better-than-expected SaaS revenue and the higher value obtained from flipping contracts from on-premises to cloud-based services.
Among other recent developments, Tyler Technologies signed a substantial $35 million contract with the Kentucky Court of Justice. The company also updated its 2024 guidance, projecting total revenues between $2.125 billion and $2.145 billion, GAAP diluted EPS to range from $6.13 to $6.28, and a free cash flow margin between 21% and 23%.
Despite potential slowdowns in service segment growth due to the transition to a SaaS model and client hesitancy impacting technology adoption, these recent developments underscore the company's strong trajectory. The analyst from Baird expressed confidence in Tyler Tech's execution, signaling belief in the company's continued growth and ability to outperform in its market segment.
InvestingPro Insights
Tyler Technologies' strong performance and positive outlook, as highlighted in the article, are further supported by recent data from InvestingPro. The company's market cap stands at an impressive $26.18 billion, reflecting investor confidence in its growth strategy. Tyler's revenue growth of 8.04% over the last twelve months and a more robust 9.84% growth in the most recent quarter align with the article's mention of the company's expanding sales funnel and successful transition to SaaS arrangements.
InvestingPro Tips indicate that 10 analysts have revised their earnings upwards for the upcoming period, which corroborates Piper Sandler's optimistic stance. Additionally, Tyler Technologies is trading near its 52-week high, with a significant 66.83% price total return over the past year, underscoring the market's positive reception of the company's strategic shifts.
It is worth noting that Tyler operates with a moderate level of debt and its cash flows can sufficiently cover interest payments, which bodes well for its financial health as it continues to invest in growth initiatives. For investors seeking more comprehensive analysis, InvestingPro offers 17 additional tips for Tyler Technologies, providing a deeper understanding of the company's financial position and market performance.
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