Manhattan Associates Inc. Sees Surge in Stock as Analysts Predict Revenue Triple

The stock of supply-chain software provider Manhattan Associates Inc. experienced an impressive 8% increase on Wednesday, setting it on course for a record close. Analysts are now weighing in on the company's fourth-quarter earnings, suggesting a potential triple in revenue over time.

Transitioning to Cloud Technology for Future Growth

Manhattan Associates is currently in the early stages of transitioning to cloud technology, poised to generate multiple billions of dollars in revenue. This forecast implies a significant improvement from the projected 2024 revenue guidance of approximately $1 billion, as emphasized by Raymond James analysts.

Despite the concerns of value-oriented investors, who may find it challenging to justify shares trading at 47 times the revised calendar year 2025 free cash flow estimate, there are few companies of this size offering such promising prospects for tripling their revenue base in the long term. Brian Peterson and his team of analysts at Raymond James explained this sentiment in a note to clients.

Raymond James Recommends Outperform and Raises Price Target

Raymond James has reconfirmed its outperform rating for Manhattan Associates' stock and has even increased its price target by 17% to $250, up from $214. Such a move implies a high level of confidence in the company's future performance.

At present, the stock is trading at $242, potentially delivering a record close. Dow Jones Market Data suggests that this would be a historic milestone, dating back to April 23, 1998.

Strong Momentum Continuing

Recent trends show that the stock has gained ground in three out of the last four days, with an impressive intraday high of $258.91, achieved early in the session. This positive momentum further underscores the company's growing success and investor enthusiasm.

Fourth-Quarter Earnings Exceed Expectations

Manhattan Associates announced record adjusted per-share earnings of $1.03 for the fourth quarter, surpassing the 81 cents reported in the previous year and easily surpassing the anticipated consensus of 80 cents according to FactSet. Moreover, revenue also experienced substantial growth, rising from $198.1 million in the prior year to $238 million, surpassing the estimated consensus of $238 million from FactSet.

Future Revenue and Earnings Guidance

The company anticipates that by 2024, revenue will range between $1.015 billion and $1.025 billion, reflecting a 9% to 10% increase. Additionally, adjusted earnings per share (EPS) for 2024 are predicted to be in the range of $3.69 to $3.79.

Manhattan Associates Inc. is setting new records and exceeding expectations, becoming an appealing prospect for investors seeking long-term growth opportunities in the supply-chain software industry.

Long-Term Financial Implications of Scaling Cloud Subscription Revenue

Truist analysts, led by Terry Tilman, express their bullish outlook on the long-term financial model implications of rapidly scaling cloud subscription revenue and compounding cash flow, along with pronounced upside opportunities.

Positive Outlook and Increased Price Target

Truist reiterates its buy rating on the stock and raises its price target to $260 from $240, indicating a positive sentiment towards future performance.

Continuous Revenue Growth

Manhattan Associates has achieved revenue records for 11 consecutive quarters, setting new records for each quarter of the year. This impressive growth trend is highlighted by Tilman.

Impressive Margins

The company's gross margin of 58.2% surpassed the forecasted 53.6%, while the adjusted operating margin of 32.3% exceeded the projected 27.2%. These strong margin figures are noted by Tilman.

Strong Demand Across Product Portfolio

Manhattan Associates experienced robust demand across its product portfolio, with approximately one-third of total bookings coming from new customers in the fourth quarter. The company's management also stated that net new potential customers represent 35% of pipeline demand. Additionally, Manhattan Associates achieved a remarkable ~75% win rate during this quarter, as mentioned in the note.

Cloud Contracts Won in the Quarter

In the quarter, Manhattan Associates secured cloud contracts with various industries, including an industrial automation and energy management conglomerate, an airline, a fast-food restaurant chain, a sporting goods retailer, a healthcare and supplies company, and a specialty retailer among others.

Positive Assessment from DA Davidson Analyst

Analyst Gil Luria from DA Davidson rates the stock at neutral but also expresses optimism about the company's numbers. Luria commends Manhattan Associates for its uniquely strong end-market for software and its continued execution in delivering best-in-class supply chain solutions and generating strong free cash flow. Luria raises his price target to $220 from $190.

Growth of Point-of-Sale Software

Manhattan Associates' point-of-sale software continues to gain market share in a segment estimated to be worth around $10 billion. This market is predominantly dominated by big tech players. Although this software contributes marginally to consolidated growth in 2024, Luria believes that it has significant momentum and has evolved into a mainstream solution.