Pacific Crest said PROS Holdings, Inc. PRO is one of the more interesting opportunities in its space, given an improving model and 40 percent, plus medium-term subscription growth opportunity.
Analysts Ben McFadden and Clarke Jeffries touted the company as an attractive investment opportunity, given that shares have depreciated from $41 to $26, even as fundamentals remain healthy. The analysts expect the fundamentals to continue to improve, as the share of recurring revenue increased to 75 percent currently from 42 percent three years back, with the potential to reach 80 percent by the end of 2018.
"The aggressive nature of the transition likely means just 20% core ACV bookings growth could be enough to drive subscription revenue growth of 40%+ for multiple years to come, and free cash flow should improve as the renewal base grows," the analysts said.
Pacific Crest believes PROS is delivering a superior product that's much more suited for real-time analytics, omnichannel B2B deployments, and vertical-specific insights.
The value proposition offered by the company's product is exemplified by enterprises' thrust toward digital transformation having seamless customer experiences as the long-term goal, the firm said.
Though the current estimates imply sustained momentum, Pacific Crest believes they assume no impact from current client migrations to subscription, which the firm feels is a $100 million+ upside opportunity.
As such, Pacific Crest maintained its Overweight rating on shares of PROS Holdings and lifted its price target from $30 to $35.
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