Credit Suisse Assumes RealPage (RP) at Underperform

Credit Suisse assumes coverage on RealPage (NASDAQ: RP) with a Underperform rating and a price target of $21.00 (from $19.00).

Analyst Kyle Chen commented, "RP reported relatively solid results in Q2, in our view, with headline revenue, Op. margin, and EPS all above Street/guidance. The qtr was highlighted by relatively good performance across most of RP's product families (Property Mgmt, Resident Services, Asset Optimization) although Leasing and Marketing continues to be challenged. We est. that Q2 organic on-demand growth was +8.8% yr/yr (~flat compared to Q1), after excl. ~$16.6M of acquired revenue, and organic ACV growth was +8.8% (slightly down from +9.6% in Q1). Despite the modest rev beat in Q2, mgmt just reiterated its prior 2016 outlook at the mdpt (+22.2% yr/yr, which CS ests. implies +10-11% organic), but increased their profitability outlook driven by continued acquisition synergies as well as more internal OpEx leverage (office consolidations, data center migrations, increased offshore workforce). Importantly, mgmt. articulated that it intends to slow the level of sale and marketing investments, while focusing more on driving increased sales force productivity, which we believe is the right approach. While we still have lingering structural concerns relative to RP's ability to reaccelerate organic growth prospects (e.g. a highly penetrated multi-family customer base, pricing pressure in certain product areas, macro-related headwinds), we are encouraged by mgmt's focus on driving earnings/cash flow leverage through a more balanced investment strategy versus over-investing to chase growth targets beyond, what we believe, RP's market is capable of accommodating. Estimates. We maintain our prior 2016 rev of $570M but increase EPS to $0.73 from $0.72. Raise 2017 rev/EPS to $649M/$0.88 from $640M/$0.84."

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

Shares of RealPage closed at $25.03 yesterday.

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