Deutsche Bank: Buy Xactly After Salesforce Vote Of Confidence

In a report published Tuesday, Deutsche Bank analyst Karl Keirstead initiated coverage of Xactly Corp XTLY with a Buy rating and a price target of $12.

The company completed its June IPO at $8 per share, and the shares have been “relatively flat” since then. Analyst Karl Keirstead mentioned that Xactly was a provider of SaaS or cloud-hosted sales incentive compensation management solutions, used by more than 200,000 users and 700+ customers.

In the report Deutsche Bank noted the “key pillars of the bull case” as:

• “Outside of the valuation, we’re encouraged by what appears to be a large and early-stage CRM SaaS market” that salesforce.com, inc. CRM has decided to use Xactly for rather than addressing themselves.
• The ROI from automating sales comp management appears to be “compelling” and Xactly is widely seen as offering “a best-in-class solution” and the first to be “cloud-native.”
• The company’s top-line growth rate stabilized at 17 percent in 1QF16, with 28 percent billings growth.
• The company may be able to sustain more than 20 percent growth in view of “the under-penetration, leading product, a move up-market and seat expansion within existing customers.”

“In summary, we like the valuation (2.9x FY16e revenues) relative to the 20%+ growth profile as well as the early-stage opportunity to automate a key sales comp process,” Keirstead wrote.