Kinaxis (TSX:KXS) is a disruptor in the Supply Chain Management space, says Cormark analyst Richard Tse.
In a research report to clients this morning, Tse initiated coverage of Kinaxis with a “Buy” rating and a one-year target price of $22.00, implying a 47% return at the time of publication.
Tse says Kinaxis, which helps enterprise customers manage their supply chains, is “positioned at the heart of the enterprise application renaissance”, and has all the qualities of a market leader, except is isn’t yet fully valued. The company’s cloud solution, called RapidResponse, is a differentiated platform in what Tse thinks is one of the three foundation pillars to the enterprise applications market. While the market is not as big as the massive $25-billion plus enterprise resource planning (ERP) market, Supply Chain Management offers plenty of room for growth, as current estimates peg it size at more than $8-billion.
The Cormark analyst notes that while many SaaS enterprise application vendors currently operate in the red, Kinaxis is making money out of the gate. He expects that the company will turn profitable this fiscal year and points out that is has actually been profitable for the last three years on an operating basis.
Tse says other enterprise application markets like ERP and CRM have been disrupted by emerging platforms and created new leaders such as Salesforce.com and Netsuite. He thinks the same thing is now happening in SCM and it is still early days in the disruption.