11 Reasons To Like LogMeIn

Baird upgraded shares of LogMeIn Inc LOGM, reasoning that the risk/reward at current levels is attractive. The firm noted that the stock is moderately below its recent highs, while it also thinks there is likely to be upside to forward estimates.

The firm sees LogMeIn as a unique SaaS story, driven by strong free cash flow and capital returns, coupled with solid revenue growth.

As such, the Baird upgraded shares of LogMeIn from Neutral to Outperform, while it maintained the price target for the shares at $130.

Justification For The Upgrade

Analyst William Power outlined 11 reasons for liking LogMeIn:

1. Strong Free Cash Flow: The analyst sees LogMeIn as a FCF story, as he estimates FCF margin of 28 percent in 2017 and 29.3 percent in 2018.

2. Unique SaaS Positioning: The company remains the most attractive in the SaaS universe in terms of its free cash flow generation, resulting in EV/EBITDA multiple of 13.4 times and P/FCF multiple of 18.4 times.

3. Valuation: Given LogMeIn stock's underperformance versus the SaaS group and its pullback from the highs following the second quarter, the analyst sees an attractive entry point.

4. Integration Progressing Well: The analyst noted that the company is already ahead of synergy guidance, with the guidance for the third quarter and 2017 appearing conservative.

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5. Story Shifting to Revenue Synergies: Exiting 2017, the firm expects the LogMeIn story to focus on revenue synergy and possible future acquisitions, which it believes would re-energize growth investors.

6. Collaboration Tailwinds: The analyst believes the company is well positioned to benefit from the 10+ percent growth in the industry, which is valued at $2.5 billion.

7. LastPass Early: The company noted that GoTo sales reps are selling LastPass, lending credence to its theory of cross-selling success.

8. Bold360: The analyst expects Bold360 along with the recent AI-based Nanorep acquisition to reinvigorate customer support revenue.

9. UC: The analyst believes Grasshopper, the legacy Citrix Systems, Inc. CTXS unified communications product would provide cross selling opportunities and benefit from a greater R&D focus.

10. Price: The analyst expects price raises to accelerate revenue growth in 2018.

11. M&A: The analyst noted that the management has expressed interest in M&A in the past. Accordingly, the analyst sees the company to be significantly larger in three to five years.

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