Apptio Hit With KeyBanc Downgrade: 'We Believe The Stock Is Now Fully Valued'

Apptio Inc APTI shares have performed well over the past year thanks to the company's proven ability to improve deployment times and grow its value offering, according to KeyBanc Capital Markets. 

The Analyst

Analyst Rob Owens downgraded Apptio from Overweight to Sector Weight.

The Thesis

The run-up in Apptio shares is justified given the company's enhanced data management capabilities and reduced deployment times, Owens said in a Monday note. (See the analyst's track record here.) 

Three "lightweight" solutions the company released have served to improve renewal and upsell activity over the past three quarters, the analyst said. 

"Among the three newest releases, Apptio Cloud Content Management and IT Financial Management modules continue to showcase momentum and contribute to improving retention rates." 

Notwithstanding the positives, Owens said he's unenthusiastic about the stock's risk-reward profile given its outperformance year-to-date. 

In an era when CIOs are moving workloads from on-premise to cloud services, Owens sees Apptio's technology business management platform as a highly differentiated one that's in the early stages of a promising market opportunity.

"Although the stock's run over the past year stands justified as a reflection of solid execution on improving deployment times and broadening the value proposition, we believe the stock is now fully valued," the analyst said. 

KeyBanc forecast modest near-term upside potential in light of Apptio's expectation for 100 percent net retention in the second quarter. The sell-side firm would become more constructive in the event of a valuation reset that improves the equity's risk-reward scenario, Owens said. 

The Price Action

Apptio shares have jumped about 55 percent year-to-date.

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