Analytics Pair Trade? Pacific Crest Loves Silver Spring, Downgrades Qlik

Analytics is expected to be in high demand in 2016.

Silver Spring Networks Inc SSNI is a vertical analytics and IoT pure-play that has 85 percent upside to Pacific Crest's $26 bull-case target. The firm reaffirmed a Buy rating and issued a 12-month price target of $17 on Silver Spring Networks on Tuesday based on an EV/sales and EV/EBITDA multiples of 2.0x and 18x the firm's 2017 estimates.

Pacific Crest is downgrading Qlik Technologies Inc QLIK to Sector Weight based on Street growth estimates of 17 percent and transitional risks in 2016 that appear too optimistic. The firm sees a fair-value range of $30 to $32 for Qlik Technologies based on an EV/sales multiple of 3.7x to 4.0x analyst 2016 estimates.

2016 transitional risks prompted Pacific Crest to downgrade Qlik Technologies as the company's latest Sense self-service analytics software represented a larger portion of revenue, which the firm sees as coming at the expense of its core QlikView product.

"A growth recovery and return to profitability contributed to SSNI shares rising 71 percent in 2015. Demand fundamentals should turn even stronger in 2016 on industrial IoT and smart grid momentum. With an upward bias to Street growth estimates of 13.7 percent, SSNI could have the most upside next year, with 85 percent potential upside to our $26 bull case," the firm noted.

Pacific Crest is predicting that 2016 spending intentions indicated data analytics and visualization software may grow to be the leading priority at an even higher pace than network security tools, based on the firm's CIO survey.

"This, coupled with multi-year secular tailwinds for analytics tied to digitization and IoT trends, increases our confidence that analytical stocks could outperform other growth names this year, particularly for those with profitable, high growth models with expanding cash flow margins," the firm commented.