These Analysts Like Medallia's Prospects For 'Experience Management' Business

Medallia Inc MDLA is a pioneer in a new type of business analytics, the effort to track customer signals known as “Experience Management,” and the newly public company is set for growth because of it, two sell-side analysts said Tuesday. The company went public last month.

The Analysts

SunTrust Robinson Humphrey’s Terry Tillman initiated coverage of Medallia with a Buy rating and a $47 price target.

Wells Fargo’s Philip Winslow started coverage of Medallia with an Outperform rating and a price target of $45.

Winslow said Medallia has a highly-engaged user base that rivals the usage levels of social networks, which positions it to keep its leading position in the market, and he expects it to deliver growth for several years.

But Medallia also looks impressive because it's in on the ground floor of a new market for Experience Management, or XM.

Experience Management

“The XM market remains early in its adoption lifecycle, as enterprises are only beginning to value the importance of … incorporating experience data (“X-data”) with operational data (“Odata”) to improve their businesses,” Winslow wrote in a note. “We believe Medallia is well positioned to capture the growing interest in XM with its holistic enterprise-grade solution that addresses a comprehensive set of constituents.”

Tillman said Medallia has established itself as a pioneer in XM software, and cited company assertions that the total addressable market in XM is nearly $70 billion.

“Understanding the pulse of customers, why they buy and what actions can drive increased revenue represent key catalysts for growth,” Tillman wrote. “Key go-to-market initiatives position the business for accelerating top-line growth and a relatively quick path to profitability and cash flow.”

Winslow also noted Medallia, which has typically focused on large customers, has recently added a focus on midsize businesses, which expands the company’s potential market. Wells Fargo is in “observation mode” on that idea, but Winslow said he’s cautiously optimistic about the move.

Winslow also acknowledged press reports that Medallia could be an M&A target, though reports are unconfirmed.

Price Action

Medallia's rose more than 4.5% Tuesday to $41.10 per share at time of publication.

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