Progress Software stock price target lowered to $57 at Citi

Investing.com - Citi has lowered its price target on Progress Software (NASDAQ:PRGS) to $57.00 from $64.00 while maintaining a Neutral rating on the stock. The company, currently trading at $48.78, remains below the consensus analyst target range of $60-83. According to InvestingPro data, the stock's RSI suggests oversold territory, potentially presenting an opportunity for value investors.

The firm attributes the 22% decline in Progress Software shares since the June 30 earnings report to what it describes as "misperceptions around fundamental health." While Citi points to softer-than-expected cash flow and margin concerns, InvestingPro analysis reveals impressive gross profit margins of 85.71% and strong revenue growth of 22.1% over the last twelve months. The company maintains a healthy free cash flow yield, though three analysts have recently revised their earnings expectations downward.

Citi explains that Progress Software's shift toward a more SaaS-oriented revenue mix and significant license renewal lumpiness have created modeling challenges for analysts, affecting reported revenue and gross margin profiles despite underlying annual recurring revenue (ARR) stability.

The research note indicates that Progress Software's earnings per share growth has faced scrutiny due to increased interest expenses and higher cost of capital compared to the last twelve months, though the firm acknowledges the company's "commendable capital-structure-management rigor" in debt reduction.

Citi concludes that Progress Software is "misunderstood but healthy," with its shares in "stubborn purgatory" due to limited comparability to conventional software assets, leading to the reduced price target based on updated earnings estimates below consensus and unchanged terminal multiples. InvestingPro 's Fair Value analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of Progress Software among 1,400+ US equities.

In other recent news, Progress Software reported its second-quarter earnings for fiscal year 2025, surpassing expectations with an earnings per share (EPS) of $1.40, compared to the forecasted $1.30. The company's revenue, however, slightly missed estimates, coming in at $237 million against a forecast of $237.53 million. Despite this, revenue grew 36% year-over-year, and the company maintained a strong operating margin of 40%. Progress Software also announced its acquisition of Nuclia, a Retrieval-Augmented Generation (RAG) as a service provider, which is expected to enhance its product offerings. DA Davidson reiterated a Buy rating on Progress Software and raised its price target to $75, citing the company's consistent business strength and strategic acquisitions. The integration of ShareFile, a previous acquisition, is reportedly ahead of schedule, showcasing Progress Software's effective management of its mergers. Furthermore, the company's Annual Recurring Revenue (ARR) saw a significant rise, growing by 46% year-over-year to $838 million. Looking ahead, Progress Software provided revenue guidance for the full year 2025 between $962 million and $974 million, with an EPS range of $5.28 to $5.40.

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