William Blair initiated research coverage of Pegasystems Inc. (PEGA $47.27), a leading provider of intelligent automation and customer engagement software solutions for enterprise customers.
Analyst Jake Roberge estimated that Pegasystems would generate revenue of $1.40 billion in 2023 and $1.55 billion in 2024, and noted that the company’s revenue growth in the past few years has been negatively affected by its transition to a subscription-based model, making past results poor proxies for growth trends in the business.
“We believe Pegasystems has developed a competitive moat for its platform in the enterprise intelligent automation and customer engagement markets,” Roberge said. “While Pega is already at a large scale, we believe its total addressable market is significant, with numerous opportunities to expand over time. The company remains well-positioned to capitalize on digital transformation themes and shifting consumer preferences toward digital interactions. We believe Pegasystems’ hyperfocus on its core markets has helped the company develop deep vertical expertise. And we expect its product-focused investments will continue, enabling Pegasystems to maintain its competitive advantage in the enterprise segment.”
Roberge continued, “We believe the company has several fundamental growth drivers that will support strong underlying growth, such as the buildout of its cloud solutions and durable growth in Pega’s intelligent automation franchise. In our view, Pega’s sticky enterprise customer base, experienced leadership team, and platform approach that customers can consolidate onto when looking to cut costs and eliminate SaaS sprawl should benefit the company during this period of macro uncertainty. While we believe the completion of Pega’s subscription transition will drive strong leverage in the model, we await greater visibility into the outcome of Pega’s lawsuit with Appian, which is making its way through the appeals process and could negatively impact Pega’s reputation and cause partners to shift resources out of the Pega ecosystem and into competitor practices.”
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