Morgan Stanley Initiates Coverage On Descartes Systems Group

Morgan Stanley initiated coverage on Descartes Systems Group Inc (USA) DSGX Tuesday with an Equal-weight rating and $15.50 price target.

Analysts led by Brian Essex noted that “Descartes is a $1bn global provider of SaaS-based logistics management and transportation solutions and operates one of the world's largest logistics networks. While the company appears well-positioned to grow share, we see the stock fairly valued at current level.”

“Many vendors offer static solutions. However, DSGX offers a network with sophisticated analytics which enables carriers, manufacturers, distributors, and retailers to manage delivery in real-time to minimize delivery times and reduce costs,” according to Essex.

“Our outlook is supported by secular inefficiencies from growing customs and compliance complexity, a need for customers to deliver products to market with real time responsiveness, and a growing need to solve the increasing complexity of global forwarding and broker operations.”

Essex concluded that “Although DSGX has performed well relative to expectations, the company's double digit revenue growth rate has been contingent on M&A to drive performance over what we estimate is a mid-to-high single digit organic growth rate. Greater contribution from higher growth segments, such as routing, telematics and data content solutions, to drive better organic growth or higher margins going forward could enable us to get more constructive on the stock.”

Descartes Systems Group Inc (USA) closed at $15.42 Monday, up 2.59 percent.