Construction Project Management Software Firm Procore Technologies (PCOR) Gains as Street Starts Coverage With Mostly Positive Ratings

June 14, 2021 10:08 AM EDT
Get Alerts PCOR Hot Sheet
Price: $103.48 +3.67%

Rating Summary:
    8 Buy, 2 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 17 | Down: 11 | New: 18
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Shares of Procore Technologies (NYSE: PCOR), a US-based construction project management software company, are up 4% in today’s trading session after Wall Street analysts started coverage of the stock with mostly positive ratings.

Analysts at Jefferies and Goldman Sachs are the ones who remained on the sidelines so far, while their colleagues at William Blair, Canaccord Genuity, Piper Sandler, Barclays, JPMorgan, KeyBanc, Stifel, and Berenberg started the coverage with a “Buy” rating.

The company raised $634.5 million via IPO last month after it sold 9.47 million shares for $67 each after announcing a price range of $60 to $65. At that time, Procore had a market value of more than $8.5 billion, before surging to over $11 billion as of today.

Brent Bracelin, a senior research analyst at Piper Sandler, started with an “Overweight” rating and a price target of $100.00 per share as he believes the company has a potential to take a part in digitizing the $10+ trillion construction industry.

“Procore is the leading vertical cloud platform that was purpose-built for the construction industry. Since 2002, it has been deployed across 1+ million construction projects across 10K + contractors and owners. Given construction is one of the least digitized industries in the world, we see tremendous value in single global platform that connects the people, systems, and data across the entire ecosystem,” the analyst says in a memo.

Bracelin argues a premium valuation is warranted based on:

1) its domain expertise in construction and vertical cloud leadership; 2) compelling growth trajectory with the potential to 4-5x revenue by CY26; 3) a wide-reaching digitization opportunity in the $10T+ construction industry where it has less than 5% penetration; 4) an expanding and differentiated portfolio of 13 products, up from 4 in 2017; and 5) an attractive 80%+ gross margin model.

He lists the following factors as key drivers behind a multi-year durable growth rate of 20%+:

1) new customer expansion given it has less than 2% penetration of 550K addressable customer logos; 2) increasing attach-rates at existing customers with 57% of customers having adopted fewer than 4 of 13 products; 3) untapped international expansion at just 12% of revenue; and 4) strategic M&A to accelerate new product and market expansion.

“The business model was stress tested and proven resilient post COVID despite the swath of commercial construction delays and 9% reduction in construction starts in 2020. Growth did moderate to 23.4% in 1Q21 versus a five-quarter average of 54.6% pre-COVID. That said, the gradual re-opening in the post-vaccination era and the proposed $1T+ infrastructure spending bill in the U.S. could materialize as incremental upside levers to growth going forward.”

KeyBanc analyst Jason Celino says PCOR represents a “pure-play idea for the digitization construction.” He initiated with an “Overweight” rating and a $105.00 per share price target.

“We view construction as one the largest, most inefficient, and un-digitized industries, and an industry that is ripe for technology disruption today. Positioned to be a vertical leader for the construction software market, we are initiating PCOR at Overweight. As one of our favorite ideas, we see PCOR as a high- growth way to play the digitization of construction, and believe a category- defining premium is warranted,” the analyst wrote in a note to clients.

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Stifel, William Blair, JPMorgan, Goldman Sachs, KeyBanc, Jefferies & Co, Barclays, Canaccord Genuity, IPO