Industrial Alliance UpgradeNovember 22, 2018 Inside the Market’s roundup of some of today’s key analyst actions The pullback in share price for Kinaxis Inc. (KXS-T) following the release of its third-quarter results during a period of weakness in the tech sector is “now at the point of being overdone,” said Industrial Alliance Securities analyst Blair Abernethy.
Accordingly, he upgraded his rating for the Ottawa-based supply chain software provider to "buy" from "hold."
"While near-term market volatility is likely to continue, we think current levels represent an attractive entry point for Kinaxis investors with a one- to two-year time horizon," said Mr. Abernethy.
Touting the potential for Kinaxis' "market proven" RapidResponse SaaS platform, Mr. Abernethy thinks the company has a "significant technology lead" over its competitors, and, despite a decline in deals in third quarter, he expects it to
"grow more rapid organically over the next two years both within its installed base and its newer vertical markets.
"We continue to believe that are on the order of 1,000-1,500 potential customers that could be targeted globally, thus providing a TAM for Kinaxis measuring at least in the $2.0-4.5-billion range, given the current product offering," he said. "The SaaS revenue model consist of over 75 per cent of revenue from annual subscriptions, and customers that make long-term commitments to the product. With its backlog ($198-million) and revenue visibility, we believe that Kinaxis can continue to operate at healthy product margins and reinvest for future organic growth."
Mr. Abernethy maintained a target price of $88 for Kinaxis shares. The average target on the Street is $96.96, according to Bloomberg data.