PRGS
Technically: The stock is very oversold with a RSI of 23, maybe the downside is to the gap in April around $52 if it gets there or around there I will probably add more.
Acquisition: Normally they make acquisitions to be accretive to both the top and bottom line. This however is a different acquisition as this acquisition is to help make there existing product line even better, to adapt to the changing times with AI and all. They say occasionally they make an acquisition like this to improve the product portfolio. Which I happen to agree with them besides 20 million isn't a lot. I can't argue with there acquisition strategy it has worked with them growing both top and bottom lines, and although this acquisition isn't most likely going to do that at least in the near term, it is gonna bolster the product portfolio to keep that 100% retention rate which is very impressive, and another thing I like about them.
Why I think it dropped on the earnings report? There are several reasons why in my opinion.
1) Stock was hot going into the report.
2) Revs although within guidance, I think was slightly lower than analyst estimates.
3) I think the market wanted them to raise their annual guidance a bit more than they did. Yes they raised guidance but I think the market with a .10 beat and .06 above the high end of q2 guidance by the company would of raised guidance a bit more than $5.25-5.37 to $5.28-$5.40, and I think the market was disappointed by that. Now they have been historically very conservative and as I said before I expect them to earn $5.50+ when this FY is over. keep in mind last quarter was q2, so next is q3, so we are already 1/2 way through this FY.
4) Cash flow this quarter was very weak. Now it was explained by moving over there latest acquisition essentially to there system, hence DSO rose because of that and cash flow were a little weaker in the quarter, they actually guided for more overall than they did last quarter despite the weak cash flow numbers this quarter, with the milestone of consolidating the recent acquisition now getting behind them the cash flows should rebound significantly in q3 and q4 from q2 levels. although the market may of not loved the cash flow #'s in q2. Anyways those are the reason I have of why the stock sold off.
ARR With several acquisition ARR has become a much larger part of the revenue story, which I happen to think is yet another plus here along with the amazing retention rate, and there ability to execute and make acquisitions work for them over the years.
Debt Debt is higher than I would like, but that is by product of there acquisitive strategy which is a big part of why they are so successful over the long run executing on bringing value to shareholders by acquiring a combo of company that are accretive to the bottom line with the occasional one that keeps the 100% retention rate intact which is so important. It is a concern but with there cash flows they have the ability to pay it down, and that is part of the plan of the company to pay down 160 million in debt over the current FY. Time will tell, but I really like PRGS here, as I said could it go down a couple of more $ and close the April gap that wouldn't be shocking but I think the stock has significant potential at current prices over the next 6-12 months, and in my opinion there are very few stock you can say that about in this frothy market, that have a significant amount of upside, limited downside, oversold conditions, and trade at a huge discount to the space. Time will tell, but I like it. All is just my opinion, and I could always be wrong though.
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