Citi named Pegasystems one of its new top picks, citing its “undervalued” artificial intelligence story and attractive valuation. Wall Street banks set a price target on Pegasystems of $92, representing a potential upside of 25% from the current trading price of about $73.50. Shares of enterprise software company Pegasystems have soared more than 50% so far this year, outperforming the broader iShares Expanded Tech-Software Sector ETF, which is up nearly 14% this year. PEGA 1Y Series The Massachusetts-based company received favorable news in its ongoing legal battle with rival Appian Corporation earlier this year. A Virginia appeals court has partially overturned a $2 billion verdict against Pegasystems, a decision that cast a major doubt on the company’s stock. Appian accused the company of stealing trade secrets. Citi analysts see this development as a catalyst for the stock. “We recently moved PEGA to our top picks as $2 billion in litigation and going concern risk has now been eliminated (expecting hundreds of millions of dollars in potential) and the recent VA Court of Appeals ruling is key to valuation, sentiment and investor interest Unlocking points. There are still risks as well as the impact of legal fees/distractions, but we significantly reduced the discount applied to our base case post-appeal (from $1B to $200M). Pegasystems’ positive outlook is not lost on other Wall Street firms. After the verdict, Loop Capital Markets and Citizens JMP also upgraded the stock to “buy” and “outperform” respectively, with a target price of about $85. From a fundamental perspective, Citi analysts also believe that Pegasystems is unique. Its approach to artificial intelligence, especially its “blueprint” strategy, sets it apart from its competitors and calls it an “underappreciated AI story.” Pegasystems offers services that use AI to convert customers’ legacy workflow diagrams into cloud-ready workflows, saving money and time. “PEGA’s unique blueprint strategy appears to be helping drive customer engagement, with hundreds of thousands of blueprints already created,” the analysts said. “We believe this is a unique approach to genAI monetization that has the potential to impact deal closing, time to value , expansion speed and improving partnerships,” Citi also said Pegasystems reported “strong” second-quarter financial results. The company reported earnings of $0.52 per share, well above the FactSet consensus estimate of $0.26 earlier this month. Revenue for the quarter was $351 million, also exceeding analysts’ expectations of $324 million. —CNBC’s Michael Bloom contributed reporting.
