Kinaxis is a “software as a service” cloud computing play.pressureUA/Getty Images/iStockphoto
Kinaxis Inc. stock shot up 10 per cent Wednesday as the Ottawa business software firm logged its third busiest day on the Toronto Stock Exchange since going public last June. The stock closed at $24.01, up 10.11 per cent on the day and 84.7 per cent since the IPO as analysts showered the company with praise in the wake of its third quarter earnings report.
"We see considerable upside to the stock price for investors looking for a name that has all the qualities of a market leader without being fully valued," Cormark Securities analyst Richard Tse said in a note as he upped his stock price target to $31 from $22. "We continue to believe Kinaxis remains one of the highest quality (public) tech newcomers to emerge in years."
A quick look at the key figures don't suggest anything to get excited about – revenue was $18.8-million for the quarter ended Dec. 31, up 15 per cent year over year, while operating earnings came in at $3.8-million. Both figures were in line with expectations, while adjusted net income was 6 cents per share, short of the 11 cents analysts expected.
However, the Street saw reason for excitement after drilling into the numbers: profits were hit by a sharp increase in sales commissions after the company won a big new, unnamed customer – but the related $20-million initial term fee wasn't paid until after the end of the quarter.
BMO Nesbitt Burns analyst Thanos Moschopoulos said in an email that Kinaxis' efforts to sell its sophisticated supply chain management software through partners such as consulting firm Accenture and contract manufacturer Celestica are gaining "good traction…[and] increasingly bringing them new sales opportunities," including the latest contract. He raised his target price on the stock to $28.
Analysts expect the company to continue to grow subscription revenues – monthly fees paid by large customers for using its software to get a better handle on their business – at a rate of more than 25 per cent per year, and for operating earnings to grow at a 20 per cent clip or greater.
Sean Silcoff