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PTC Stock Surges 41% in a Year: Will the Rally Continue?

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PTC Inc (PTC - Free Report) is continuing its upward trajectory, with a gain of 41% in the past year compared with the S&P 500 composite and sub-industry’s growth of 29.2% and 35.7%, respectively.

PTC is a software provider offering a comprehensive portfolio of software including computer-aided design (CAD) and product lifecycle management (PLM) solutions. The company’s software can be delivered on-premises, in the cloud or in a hybrid model.

Solid financial performance has been driving a good run on the trading front. The stock has gained 5% since announcing first-quarter fiscal 2024 results on May 1.

PTC outpaced estimates in three of the trailing four quarters while missing in the other. It has an average positive earnings surprise of 8.8%.

The stock is trading 5.4% below its 52-week high of $194.24, suggesting further upside potential.

Zacks Investment Research
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Growth Factors

PTC’s performance is gaining from solid momentum across the PLM and CAD business segments especially Windchill PLM and Creo products. In the fiscal second quarter, PLM revenues were $373 million, up 8% year over year. CAD revenues were $230 million, up 16% year over year.

PTC is also focusing on Service Lifecycle Management or SLM segment, which is primarily being driven by ServiceMax. Acquired in January 2023, ServiceMax is a cloud-based field service management (FSM) software company. It provides FSM services built on the Salesforce platform, which includes all information pertaining to serviced products like description, serial number, service history, and scheduling and dispatching technicians, etc. PTC is looking to cross-sell ServiceMax SLM into its customer base.

Codebeamer has also contributed significantly to the increase in Application Lifecycle Management (ALM) business. Further, the acquisition of pure-systems (especially pure:variants solutions) complements Codebeamer and strengthens the company’s position in the rapidly growing ALM market.

PTC is also directing much attention toward the software-as-a-service transition. Cash flow is being driven by the resilience in the subscription license business model and operational discipline.

However, the company has lowered the 2024 revenue guidance due to the negative impact of forex. The company now expects 2024 revenues in the range of $2.270-$2.340 billion compared with the previous guidance of $2.270-$2.360 billion. Stiff competition in the PLM and CAD spaces remains an additional headwind for this Zacks Rank #3 (Hold) stock.

For fiscal 2024, annual run rate or ARR is expected in the range of $2.200-$2.240 billion, which indicates a rise of 11-13% year over year.

For 2024, cash from operations is projected at $745 million, indicating a rise of 22% on a year-over-year basis. The free cash flow is forecast at $725 million, suggesting a 23% increase year over year.

Estimate Revision Activity

The Zacks Consensus Estimate for PTC’s fiscal 2024 and 2025 revenues is pegged at $2.3 billion and $2.6 billion, indicating growth of 9.8% and 12.8% from the year-ago levels, respectively.

The consensus estimate for fiscal 2024 and 2025 EPS is expected to rise 13.6% and 23.6% from the prior-year actuals to $4.93 and $6.09, respectively.

The long-term earnings growth rate is 15.3%.

Stocks to Consider

Better-ranked stocks worth consideration in the broader technology space are Badger Meter (BMI - Free Report) , Oracle (ORCL - Free Report) and The Descartes Systems Group Inc (DSGX - Free Report) . While BMI sports a Zacks Rank #1 (Strong Buy), ORCL and DSGX carry a Zacks Rank of 2 (Buy) each, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BMI’s 2024 EPS is pegged at $3.89, up 9.9% in the past 60 days. BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.7%. The long-term earnings growth rate is 15.6%. Shares of BMI have risen 44.1% in the past year.

The Zacks Consensus Estimate for ORCL’s fiscal 2025 EPS is pegged at $6.15. The long-term earnings growth rate is 9.7%. Oracle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 3.6%. Shares of ORCL have risen 26.8% in the past year.

The Zacks Consensus Estimate for Descartes’ fiscal 2025 EPS has increased 1.2% in the past 60 days to $1.69. Descartes’ earnings beat the Zacks Consensus Estimate in two of the last four quarters, while missing in the remaining two quarters, the average surprise being 5.1%. Shares of DSGX have risen 32.3% in the past year.

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