UPDATE: Wedbush Securities Initiates Ultimate Software Group at Neutral; Upside Baked In

Wedbush Securities initiated coverage on Ultimate Software Group ULTI with a Neutral rating and a $86 price target. Wedbush Securities noted, "[W]e see a few potential negative catalysts. One risk is any lengthening of implementation cycles due to larger, more complex deals; this development could reduce ULTI's recurring revenue and EPS over a 3-quarter time frame, as happened in 2Q08. A second risk would be deceleration of ULTI's EPS growth as the pace of accruals abates. In the recent 3Q, ULTI began capitalizing a portion of R&D spend, which we believe will defer about $12M in costs from the FY13 income statement. We see sound reasons for ULTI's business model changes, which have given rise to other accruals, but ULTI's growing accruals may be creating over-optimism about its sustainable long-term earnings growth." Ultimate Software Group closed at $97.56 on Wednesday.