Wedbush's Enterprise Software Picks For '16

• According to Steve Koenig of Wedbush, his high-growth software index continues to outperform other software issues.
• Koenig added that as a group, trading multiples for the high-growth software stocks have remained below the eight to 10x forward EV/revenue level and the current 7.5x multiple is just above the 6.5x trough multiple seen in the spring of 2014.
• The analyst named Qlik Technologies Inc QLIK and PTC Inc PTC as near-term picks and Proofpoint Inc PFPT as a long-term pick.

Heading into the end of the calendar year, Steve Koenig of Wedbush overviewed the Enterprise Software group, noting that high-growth software multiples remain below the eight to 10x forward EV/revenue level they held prior to the correction in late August. Koenig continued that the current 7.5x multiple for the group is "slightly" above the 6.5x trough multiple following the spring 2014 market correction and the bottom half of 2014. The analyst noted a "disappointing" IPO pricing for Mimecast Ltd MIME and Suare Inc SQ have "probably contributed" to the "subdued" multiples. Qlik: Attractive Entry Point According to Koenig, Qlik Technologies' "solid" growth trends is expected to resume following a "weak" third quarter performance. The analyst is expecting the company's fourth uarter licenses growth to be near 20 percent, driven by a "strong" product cycle with Qlik Sense and ongoing investments in QlikView. He also noted that his checks don't "point to any change in the competitive dynamic." Koenig argued that if the company can demonstrate "good progress" towards its operating margin goal of 20 percent, the stock's 3.7x EV/fiscal 2016 revenue "looks pretty attractive." PTC: Favorable Risk To Reward Koenig stated that PTC is "poised to benefit" from a transition to a subscription-based and recurring revenue profile following its transition plan which was communicated in November. The analyst suggested the company's plan "appears sound" and "doesn't look overly aggressive." In addition, the new profile will allow investors to better monitor progress. Koenig suggested that in the near-term, investors will "likely react positively" to not only the company's progress on the subscription transition, but growth in IoT (Internet of Things) bookings, and possibly an improving macro environment which will provide "attractive upside" to the current stock's valuation. Proofpoint: Best Idea For 2016 Koenig pointed out that while shares of Proofpoint continued its "strong run" following its third quarter print, the stock's risk to reward profile is still attractive over the next 12 months. The analyst argued that the company is benefiting from "strong momentum" for targeted attack protection, accelerating add-on activity into its base, new customer additions, and the recently announced "encouraging" partnership with Intel Security in which Intel will transition its customers to Proofpoint.