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Robert DeFrancesco’s Tech-Stock Prospector April 11, 2014 BMO Capital Upgrades Demandware (DWRE) on Pullback BMO Capital today upgraded shares of Demandware (DWRE, $52.44)—a provider of cloud-based e-commerce solutions used by retailers and brands—to ‘Outperform’ with a price target of $70 based on accelerating subscription growth, enterprise bookings momentum and confidence in the management team’s ability to execute. Demandware delivers a set of enterprise-class merchandising applications on a mission-critical cloud platform. With the company’s solutions, customers are able to easily design, quickly implement and totally manage their own customized e- commerce sites—including websites, mobile applications and digital storefronts. The alternative, maintaining an in-house solution behind a firewall, can be pricey and inefficient; some of the drawbacks include a lack of scalability, the inability to fully customize and no real upgrade cycle. Demandware, which targets potential customers with annual online sales ranging from as little as $2 million at the low end to more than $300 million, has a total addressable pool of roughly 3,500 companies in North America and 2,500 across Europe. As of the end of 2013, Demandware had 204 customers live on its platform, a 35% increase from the year-ago level (and up from 184 at the end of the third quarter), with 820 live sites (up 42% year over year). Contract backlog (made up of unbilled committed minimum subscriptions plus deferred revenue) stood at $348.6 million, an increase of 67% from the year-ago level. In the recent market pullback, Demandware shares have dropped 36% from the all- time high of $82.23 reached on March 5. At that peak, the forward revenue multiple was 21. With the market cap back down to $1.88 billion, the stock now trades at 13 times the 2014 consensus revenue estimate of $144.3 million (the high estimate on Wall Street is $151.5 million). ------------------------------------------------------------------------------------------------------------ Download the April 2014 issue of Tech-Stock Prospector to your Amazon Kindle or Kindle for iPad/iPhone reading app here: http://www.amzn.com/B004T6Z0ME Here are some of the topics covered in the April 2014 issue: *Is it time to buy momentum stocks again? *3 high-growth names to watch *On the Radar: 4 emerging software vendors *Data Breach! A way to play growth in smart cards *Gauging the uptake of the mobile wallet *Facebook searches for the next social networking hot spots *Match Game: Why IAC/InterActiveCorp rules online dating *Salesforce still delivering impressive growth *Cloud View: Ultimate Software sets ambitious growth targets *Workday continues to disrupt the HR/HCM software market *New products are major contributors for Aruba Networks *Small-Cap Feature: Imperva secures the datacenter *Why the shift to the cloud is causing new security concerns *IT Security Focus: Several reasons to be bullish on Fortinet *Intel invests big in Big Data *A promising Cisco Systems/Akamai partnership *Apple preps for massive iPhone 6 upgrade cycle *Are activist investors going to take on Symantec? *Deal Report: Analyzing the GrubHub IPO Order the April 2014 issue of TSP here: http://www.amzn.com/B004T6Z0ME Tech-Stock Prospector Managing Editor Rob DeFrancesco has more than 20 years of experience covering the tech sector. He is a former senior writer with Louis Rukeyser’s Wall Street. TechStockProspector.com, launched in 2003, is an investment-research service focused primarily on the networking, storage, security, wireless and software sectors. For more information or to sign up for the service (includes intraday research/analysis/commentary via the website and a monthly PDF newsletter), call TSP Customer Support: 800-392-0998.
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