Stifel Downgrades PROS Holdings Following Narrowed Q4, FY15 Outlook

Stifel recently issued a company note on PROS Holdings, Inc.

after the company announced preliminary 4Q15 results that met revenue and exceeded EPS expectations but missed projected bookings targets. Currently, Stifel downgraded PROS Holdings to Hold while a price target is unavailable. Tom Roderick and Matthew Van Vliet, analysts at Stifel, wrote, "We have held deep reserves of patience with PROS as it has navigated the tricky waters of a model transition to SaaS, but suggest that further patience is unwarranted without first seeing more material signs of progress. We do not view our downgrade from a Buy rating to a Hold rating as a call that PROS will not be capable of ultimately making a successful transition to a Cloud-centric model, but rather an acknowledgement that it could take another two years,at least, to turn the corner. Analysts noted two key reasons why PROS missed expectations for bookings: 1. Complicated sales packaging and pricing The combination of these led to a decline in top line growth as clients lacked confidence that the products would deliver optimal business performance. 2. Smaller deal sizes PROS management noted that their customers as a whole ordered subscriptions for their immediate needs rather than for future growth. Stifel is concerned that PROS Holdings' global sales force may not be prepared to take advantage of the "Cloud First" approach which could harm future profitability and allow other competitors steal market share. Going forward, analysts believe that these execution issues need to be a top priority in order to reverse the trend of declining growth and exceed expectations in the future while delivering high-quality products for their business clients. Currently, PROS Holdings is trading at $15.70, down 18.57 percent.