Needham & Company Starts Rally Software Development (RALY) at Buy

Needham & Company initiates coverage on recent IPO Rally Software Development (NYSE: RALY) with a Buy rating and $24 price target.

Analyst Michael Huang said, "We see Rally as a compelling, secular growth story with premium growth rates, a strong and sustainable competitive position, a large addressable Greenfield market opportunity, and a predictable recurring revenue model."

He continued, "Rally's addressable market opportunity for Agile application lifecycle management is well-sized (6-8 million potential seats worth multi-billions of dollars in annual subscription revenue), underpenetrated (Rally has only sold 168K seats), and horizontal in nature (Rally sells across verticals), which certainly gives Rally ample headroom to drive premium recurring revenue growth rates (>25%) for the foreseeable future."

The firm sees a number of secular trends driving an increasingly urgent need for Rally-type solutions, including 1) rising strategic importance of software as the key differentiator across products across industries (“softwarization of the world”); 2) increased preference for Agile development vs. oldschool Waterfall in order to speed time to market and increase customer relevance; and 3) rising preference for SaaS.

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

Shares of Rally Software Development closed at $19.32 yesterday.

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