KeyBanc Calls PTC 'Leader In PLM, CAD,' Starts At Overweight

• PTC Inc PTC shares are down 8 percent year-to-date, declining steadily after hitting a high of $42.53 on June 22.
• KeyBanc Capital Markets’ Monika Garg initiated coverage of the company with an Overweight rating and a price target of $40.
• PTC is a market leader in PLM and CAD, with solid growth potential in SLM and IoT, Garg said, while adding that the company faces several opportunities for margin expansion.

Analyst Monica Garg mentioned that PTC is a leader in the PLM and CAD markets and has significant opportunities to grow in the SLM and IoT [Internet of Things] markets. The company achieved a strong entry into IoT, which offers upside potential.

PTC aims at shifting from a perpetual license model to a subscription model. Garg expects the subscription model to drive 20-40 percent higher value per seat for the company. A subscription model would also result in higher visibility, margin expansion, higher cash flow and growth.

The analyst said that PTC has “strong margin-expansion opportunity” and is looking to expand its operating margin from the current 24 percent to 28-30 percent over the next three years. The company has signed partnerships to help reduce its low- margin service revenue, which could also help improve margins.

PTC’s shares have plunged 25 percent over the past couple of months. “We believe the recent pullback creates attractive opportunities,” the KeyBanc Capital Markets report stated.