Vocera Communications (VCRA) PT Raised to $39 at Piper Jaffray

Piper Jaffray analyst, Sean Wieland, raised his price target on Vocera Communications (NYSE: VCRA) to $39.00 (from $33.00) while maintaining a Overweight rating after taking management on the road to meet with investors. He walked away with the belief that the strategy to expand the company's value proposition is panning out; deal size is increasing, and high-teens revenue growth and + 40% incremental EBITDA margins warrant a 5x multiple up from 4.3x.

The analyst stated "Vocera is “very comfortable” with organic revenue growth in the mid-teens (vs street at 14.4% and PJC 16.6%). Optically 2018 revenue growth has decelerated to 12%, but that’s because the conversion to the 606 accounting rule pulled $8M (or ~450bps of growth) out of 2018". The analyst stated "Under the 606 accounting rules you recognize service revenue upon contract signing, not as incurred. Normalized organic growth has been remarkably steady. The composition of revenue is increasingly related to software and software related maintenance, which now stand at >50% of revenue. Management reiterated a 40% incremental EBITDA margin (vs street consensus of 34%)".

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