Pivotal Software Wins A Buy Rating From KeyBanc

KeyBanc started coverage of platform as a service, or PaaS, provider Pivotal Software PVTL. The company says its platform, which is based on a process called containers, accelerates and simplifies software development.

The Analyst

KeyBanc analyst Alex Kurtz initiated coverage of Pivotal Software with an Overweight rating and a $24 price target.

The Thesis

Pivotal has become one of the top PaaS providers to the world's largest 2,000 companies, according to Kurtz.

Estimating the company's subscription growth rate at 40 percent, Kurtz believes it's benefiting from the rapid expansion of the PaaS market in general and the quickly increasing popularity of containers in particular. Most enterprises believe that containers "will become the standard model" for PaaS, the analyst said.

Additionally, Pivotal's architecture is simpler than that of its competitors, while it provides services that enable large enterprises to undertake "digital initiatives," Kurtz explained.

In a bull-case scenario, Pivotal's stock can reach $27, while it can fall to $15 in a bear case, Kurtz wrote.

Price Action

Pivotal Software's stock traded around $19.15 at time of publication. It's slated to report its first-quarter results on June 12.