Anaplan Shares Jump Over 20% on Strong Q2 Earnings; Buy with Target Price of $70

Anaplan Inc, a global cloud-based planning software company headquartered in San Francisco, reported a 26% jump in quarterly revenue as subscription-based sales surged amid COVID-19 pandemic and raised its revenue forecast for the fiscal year 2021, sending its shares up over 20% on Wednesday.

The business-planning software company said its total revenue increased 26% year-over-year to $106.5 million in the second quarter ended July 31 and subscription revenue surged 32% year-over-year to $97.1 million. GAAP operating loss was $37.7 million or 35.4% of total revenue, compared to $41.2 million in the second quarter of fiscal 2020 or 48.7% of total revenue.  GAAP loss per share was $0.26, compared to $0.31 in the second quarter of fiscal 2020.

“We reiterate our Outperform rating on Anaplan and raise our price target from $55 to $70. The company reported a nice FQ2 revenue and EPS beat driven by nice expansion business and help from the company’s partners,” said Shebly Seyrafi, equity analyst at FBN Securities.

“We are encouraged by the outlook in Europe in FQ3 following international growth of 35% Y/Y in FQ2 (better than the 20% Y/Y growth in the Americas). We arrive at an estimated NG EPS of -$.08 (above consensus of -$.10). The company plans to make investments in FH2 2021 in go-to-market and in engineering. The trend in Europe appears to be more encouraging,” Seyrafi added.

Anaplan forecasts total revenue between $109 and $110 million in the third quarter and between $437 and $439 million for full-year fiscal 2021.

Anaplan shares closed 21.60% higher at $58.15 on Wednesday. Also, the stock is up over 10% so far this year.

Executive comments

“Businesses need an agile digital connected planning platform in today’s challenging environment. We are at the forefront of offering real-time, valuable business performance insights, providing a competitive advantage to our customers,” said Frank Calderoni, chief executive officer at Anaplan.

“I’m pleased with our progress this quarter, and we are confident in the long-term market opportunity for Connected Planning.”

Anaplan stock forecast

RBA raised their target price to $75 from $55, Evercore ISI upped their price objective to $72 from $57. Other equity analysts also recently updated their stock outlook. Canaccord Genuity raised their target price to $66 from $55. Morgan Stanley gave a target price of $58 with a high of $94 under a bull-case scenario and $38 under the worst-case scenario.

Twelve analysts forecast the average price in 12 months at $57.00 with a high forecast of $74.00 and a low forecast of $35.00. The average price target represents a -1.98% decrease from the last price of $58.15. From those 12 analysts, nine rated “Buy”, two rated “Hold” and one rated “Sell”, according to Tipranks.

We think it is good to buy at the current level and target $70 as 50-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

Analyst view

“As planning moves from an annual process run by the finance department to an ongoing collaborative effort across the entire organization, we see Anaplan as a key beneficiary of this trend. The company’s core Connected Planning platform enables collaborative planning across all areas of an organization, including finance, sales, supply chain, marketing, human resources, and operations,” said Stan Zlotsky, equity analyst at Morgan Stanley.

“With an estimated $24 billion addressable market and a strong competitive moat, we see 22% revenue CAGR over the next 15 years. While we are optimistic on the sustainable growth trajectory, near term risk from slower macro leaves us on the sidelines at our $58 price target,” Zlotsky added.

Upside and Downside risks

Upside: New sales hires drive to become fully productive faster than expected, driving upside to growth and margin estimates – highlighted by Morgan Stanley.

Downside: 1) Increased competitive pressure from larger, well-established incumbents (Oracle, IBM, SAP) and emerging vendors like Workday/Adaptive. 2) Unlikely to achieve operating profitability over the next couple of years. 3) Investment in new sales hires fail to generate meaningful productivity.