Canaccord Genuity Raises Price Target on Descartes Systems Group (DSGX) Following 2Q16
Canaccord Genuity reiterated a Buy rating on Descartes (NASDAQ: DSGX), and raised the price target to $20.00 (from $18.00), following the company's 2Q16 earnings results. DSGX reported July quarter revenues of $45.2M compared to consensus' $45.23M estimate. EPS was reported in-line with consensus at $0.07.
Analyst David Hynes commented, "Descartes reported solid Q2/16 results as execution against the firm’s three core drivers – omni-channel retailing, increasing trade regulation, and a broadening of the data/ network backbone – continues to translate into steady, meaningfully profitable growth. On the incremental front, margin contribution from the recently acquired MK Data Services was impressive, and we were pleasantly surprised by a second consecutive quarter with an EBITDA margin range increase, this time to a still category-leading 30-35%. From an investment standpoint, we view DSGX’s relentless focus on margin expansion and cash conversion as uniquely attractive in a space that at times can be solely focused on top-line growth. While the valuation pitch isn’t the lay-up that it once was, we can conservatively construct a case in which this stock delivers 15%+ returns for the next several years; that’s more than enough for a continued BUY, and we believe DSGX is a good choice for the “safe port” bucket of any software portfolio."
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Shares of Descartes closed at $17.60 yesterday.