Gridsum Is Riding The Digital Intelligence Wave
Citi says Gridsum Holding Inc – ADR (NASDAQ: GSUM) could benefit from its early mover advantage and gain from rapid growth in China’s data analytic and digital intelligence markets.
The brokerage has started coverage on Gridsum with a Buy rating and a target price of $21, implying a potential upside of 27.9 percent.
“We see immense market potential for software spending in China, which currently is at only US$18.3 billion in 2015 vs. US$240 billion in the US,” analyst Alicia Yap wrote in a note.
Gartner estimates that China’s business intelligence software market to generate a 16 percent CAGR from $212 million in 2015 to $445 million in 2020.
Yap believes Gridsum has the potential to exploit this burgeoning market with its more than 1,000 software patents in China and globally, and expertise of analyzing large volume of data across different industries since 2009.
Notably, Citi pointed out that Gridum has scope for upselling/cross-selling with its strong and loyal customer base (300 customers across industries and >30 govt agencies in China) with a 138 percent revenues net retention rate in 2015.
Turning Profitable, Looking Forward
Yap expects Gridsum to turn profitable in 2017 with GAAP and non-GAAP net margin of 3.3 percent and 4.9 percent and anticipates potential success from new financial solutions and vertical customer expansion.
However, the analyst sees risks from slow adoption of the SaaS model, reliance on customers' ad budget and macro weakness hurting customer budgets.
At the time of writing, shares of Gridsum were down 0.12 percent to $16.40.
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Latest Ratings for GSUM
|Oct 2016||Stifel Nicolaus||Initiates Coverage On||Buy|
|Oct 2016||Citigroup||Initiates Coverage On||Buy|
|Oct 2016||Goldman Sachs||Initiates Coverage On||Buy|
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