Kinaxis gets price target raised to $100 at Paradigm Capital

Following the company’s second quarter results Paradigm Capital analyst Kevin Krishnaratne has raised his target price on Kinaxis (TSX:KXS).

Last Thursday, Kinaxis reported its Q2, 2018 results. The company earned (all figures USD) $4.26-million on revenue of $39-million, a topline that was up 18.6 per cent over the same period last year.

“Q2 represented another strong quarter for Kinaxis — both the top and bottom line. We had record revenue from Europe, which reaffirms our decision to invest significant sales and operations resources in the region,” CEO John Sicard said. “We see even greater opportunity ahead as the expanded European team continues to engage with prospective accounts across all market verticals, but particularly consumer packaged goods, automotive and life sciences. During the quarter, we launched our self-healing supply chain application applying advanced machine learning algorithms to detect key supply chain design gaps and automatically take corrective action before they impact performance. We also announced a number of new customers across regions and verticals, including top-tier brands such as Volvo, Ipsen and Extreme Networks, and provided some insight into the success we have been having at our existing customer, BASF. There is no greater testament to the proven transformative value of our unique concurrent planning technique than its ability to serve leaders in such different industries, all from the same cloud-based platform.”

Krishnaratne says KXS bested his expectation on both the top and bottom line. He thinks the company has lots of runway left.

“(Kinaxis’s) Q2 results which displayed strong Subscription Services growth trends and EBITDA margins,” the analyst notes. “Kinaxis’ recent focus on Europe is paying off with strength in the region helping drive outperformance in the quarter. Verticals including Automotive, Life Sciences, and CPG continue to show strong momentum. We remain very positive on Kinaxis’ growth opportunity given its low market penetration (sub-10%) and increasing pace of larger customer wins driven by Partners.”

In a research update to clients today, Krishnaratne maintained his “Buy” rating, but raised his one-year price target on KXS from $91.00 to $100.00, implying a return of eight per cent at the time of publication, including dividend.

The Paradigmn Capital analyst thinks Kinaxis will generated Adjusted EBITDA of $43.0-million on revenue of $154.6-million in fiscal 2018. He expects those numbers will improve to EBITDA of $57.8-million on a topline of $187.9-million the following year.