Kaufman Raises Price Target on Ultimate Software (ULTI), Sees Recent M&A Activity as Positive

Kaufman Bros. is reaffirming its Buy rating on shares of Ultimate Software (NASDAQ: ULTI) while raising its price target from $65 to $77.

Given the company's current market position and the market conditions, the firm believes ULTI may be a strategic target for software vendors like Oracle (Nasdaq: ORCL), SAP (NYSE: SAP) and Lawson (Nasdaq: LWSN), as well as payroll players ADP (NYSE: ADP) and Ceridian.

The firm believe the recent consolidation activity in the SaaS space and acquisition bids for SuccessFactors (Nasdaq: SFSF) and RightNow (Nasdaq: RNOW) calls for a higher valuation on shares of ULTI.

Recent data indicates lower unemployment rates, something which should really bode well for the company and its earnings.

An analyst at Kaufman comments, "Improvement in employment rates over the next few quarters could boost the demand outlook for Ultimate, in our view. As the model is based on a per employee and per month basis, growing headcounts at existing customers as hiring picks up should help demand, in our view. In addition, as Ultimate has significant exposure to the SMB market a better environment for SMB firms could assist Ultimate moving forward."

For FY11 and FY12, the firm is forecasting EPS of $0.66 and $1.12. Total sales for FY11 and FY12 are expected to be $268.7 million and $332 million.

For an analyst ratings summary and ratings history on Ultimate Software click here. For more ratings news on Ultimate Software click here.

Shares of Ultimate Software closed at $68.69 yesterday.

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