Cloud Midcap New Relic Could Grow 40% Or More Every Quarter

• New Relic Inc NEWR shares have gained 19 percent in the last 3 months, and are currently hovering around the 52-week high of $39.89.
• Pacific Crest’s Rob Owens initiated coverage of the company with an Overweight rating and a price target of $47.
• The stock deserves a premium valuation, given the company’s impressive growth, Owens said.

Analyst Rob Owens mentioned that New Relic is a leading player in the Application Performance Management [APM] segment and its unique platform is designed to understand the end-user experience, application usage trends and the components leading to degradation of performance.

The company’s growth has been driven by a focus on small and medium businesses. Owens added, “As an easy-to-try-and-buy solution, in our view, the platform has had much higher adoption in greenfield opportunities than competitors with a high concentration of attachment to cloud-native applications.”

New Relic has registered 70 percent y/y revenue growth over the past four quarters, with the platform being expanded beyond core APM. The company has introduced four new modules in the past two years. “New solutions already represent over 10% of revenue and should continue to grow as the company moves to larger deployments,” Owens wrote.

The company is likely to generate robust growth in the near future as it continues to develop new solutions and builds up a new enterprise sales team. “We believe new solutions set the company up well to sustain growth over 40% in the near term, which puts it in a select group of enterprise IT disruptors,” the Pacific Crest report stated.