Cornerstone OnDemand Positioned For Multiyear Subscription Growth, Piper Jaffray Says In Upgrade

Piper Jaffray named improving fundamentals as the rationale behind a bullish turn on Cornerstone OnDemand, Inc. CSOD.

The Analyst

Analyst Alex Zukin upgraded Cornerstone OnDemand from Neutral to Overweight and increased the price target from $46 to $60, suggesting roughly 15-percent upside.

The Thesis

Cornerstone OnDemand's bookings have outperformed internal expectations in the second quarter, and second-half pipelines remain attractive from a strategic deal perspective, Zukin said in a Tuesday note. (See the analyst's track record here.) 

Cornerstore is set for multiyear mid-to-high teens subscription revenue growth rate at a minimum due to its competitive strengths and market opportunity, the analyst said. 

Headwinds tied to the shift of services revenue off the company's books should abate in 2019 before normalizing in 2020, Zukin said. 

The talent management software company's shares are now trading more than a turn below the efficient growth comp group, according to Piper Jaffray. 

" ... We like the multiquarter setup, as we see the potential for shares to re-rate as investors start to gain comfort that execution is truly turning a corner," Zukin said. 

The Price Action

Cornerstone OnDemand shares have gained about 48 percent year-to-date. 

The stock was up 4.69 percent to $54.87 at the time of publication Tuesday. 

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