JMP: 4 Reasons To Like Apptio Shares At These Levels

Apptio Inc APTI's stock gained 40 percent during its first day of trading in 2016 to close at $22.55, but the stock lost all momentum over the subsequent months. Shares of Apptio fell near $10 per share in April 2017 before rebounding and recently breaching the IPO closing price.

The Analyst

JMP Securities' Greg McDowell initiated coverage of Apptio's stock with a Market Outperform rating and $28 price target.

The Thesis

Apptio is a leading provider of technology business management solutions, enabling IT leaders to better analyze and optimize technology investments, McDowell said in the initiation note. (See McDowell's track record here.) 

The analyst named four primary reasons why the stock is attractive at current levels:

• Apptio is a leader in an "underpenetrated and underappreciated" market.
• Management has shown strong operational leverage, as non-GAAP operating margins rose nearly 1,400 basis points in 2016 and are expected to gain another 500 basis in 2017. 
• Apptio's business model of expanding its product portfolio creates a "more distinct business value proposition" for customers.
• The company boasts a "strong" enterprise customer base that includes 40 of the Fortune 100 companies.

Apptio's stock is trading at a 3.7x EV/2019E multiple, but a 4.7x multiple would be more appropriate — and still represents a discount to the overall subscription software peer group, McDowell said. 

Price Action

Shares of Apptio were trading higher by 0.3 percent Monday morning.

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