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Can the ShareFile Buyout Change PRGS' Fate or is it a Risky Bet?
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Progress Software’s (PRGS - Free Report) shares gained 2.49% and closed at $57.62 on Sept. 10. The upswing can be attributed to its plan to acquire ShareFile for $875 million.
PRGS shares have gained 14% in the past three months outperforming the Zacks Computer – Software industry’s decline of 4.4% and the broader Zacks Computer & Technology sector’s decline of 6.4%.
ShareFile specializes in AI-driven, cloud-based document collaboration services for various industries, including business, finance, healthcare, and construction. The deal will strengthen PRGS’ portfolio by providing it with SaaS-native, AI-powered document-centric collaboration and workflows, a client portal, encrypted file sync and share, and eSignature. The deal is expected to close before the end of Progress Software’s fiscal year.
PRGS' strategy to buy Sharefile is well suited for its expansion plan as the deal will add 86,000 new consumers, generating roughly $240 million in revenues annually.
Progress Software also announced that it will suspend dividend payout following the closure of the ShareFile acquisition. The funds will instead be used to repay debt, improve liquidity for future acquisitions, and support share repurchases.
Progress Software anticipates revenues to reach the landmark of $1 billion in fiscal 2025, especially with the added boost from the ShareFile acquisition.
PRGS reported revenues of $175 million for the second quarter of fiscal 2024, exceeding guidance, with robust operating margins exceeding 38%. Earnings were $1.09 per share, which was 12 cents above the high end of the guidance range.
The modest Annual Recurring Revenue (ARR) growth of 1% to $579 million, and the 99% net retention rate indicates strong customer loyalty and stable demand for recurring revenue sources. The steady ARR and retention figures are positive signs of the company’s ability to sustain consistent top-line growth from long-term contracts.
The company adopted the new Progress Data Platform by integrating MarkLogic and Progress Technologies, which deliver a powerful solution for enhancing AI applications. It provides a comprehensive approach to verifying and enriching GenAI model output using both semantic and vector capabilities for Retrieval Augmented Generation.
PRGS Offers Positive Q3 Guidance
For the third quarter of 2024, Progress Software expects revenues between $174 million and $178 million, and non-GAAP earnings are expected to be in the range of $1.11-$1.15 per share.
The Zacks Consensus Estimate for third-quarter 2024 revenues is currently pegged at $175.8 million, suggesting a 0.02% decrease over the figure reported in the year-ago quarter.
The consensus mark for earnings is currently pegged at $1.14 per share for the third quarter of 2024, suggesting 5.6% growth over the figure reported in the year-ago quarter. The figure has been unchanged over the past 30 days.
Zacks Rank & Valuation
Progress Software currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise to hold off for a more favorable entry point in the stock.
Its Value Score of C suggests a stretched valuation at this moment.
Image: Bigstock
Can the ShareFile Buyout Change PRGS' Fate or is it a Risky Bet?
Progress Software’s (PRGS - Free Report) shares gained 2.49% and closed at $57.62 on Sept. 10. The upswing can be attributed to its plan to acquire ShareFile for $875 million.
PRGS shares have gained 14% in the past three months outperforming the Zacks Computer – Software industry’s decline of 4.4% and the broader Zacks Computer & Technology sector’s decline of 6.4%.
ShareFile specializes in AI-driven, cloud-based document collaboration services for various industries, including business, finance, healthcare, and construction. The deal will strengthen PRGS’ portfolio by providing it with SaaS-native, AI-powered document-centric collaboration and workflows, a client portal, encrypted file sync and share, and eSignature. The deal is expected to close before the end of Progress Software’s fiscal year.
PRGS' strategy to buy Sharefile is well suited for its expansion plan as the deal will add 86,000 new consumers, generating roughly $240 million in revenues annually.
Progress Software also announced that it will suspend dividend payout following the closure of the ShareFile acquisition. The funds will instead be used to repay debt, improve liquidity for future acquisitions, and support share repurchases.
Progress Software Corporation Price and Consensus
Progress Software Corporation price-consensus-chart | Progress Software Corporation Quote
Factors to Drive PRGS Stock Upward
Progress Software anticipates revenues to reach the landmark of $1 billion in fiscal 2025, especially with the added boost from the ShareFile acquisition.
PRGS reported revenues of $175 million for the second quarter of fiscal 2024, exceeding guidance, with robust operating margins exceeding 38%. Earnings were $1.09 per share, which was 12 cents above the high end of the guidance range.
The modest Annual Recurring Revenue (ARR) growth of 1% to $579 million, and the 99% net retention rate indicates strong customer loyalty and stable demand for recurring revenue sources. The steady ARR and retention figures are positive signs of the company’s ability to sustain consistent top-line growth from long-term contracts.
The company adopted the new Progress Data Platform by integrating MarkLogic and Progress Technologies, which deliver a powerful solution for enhancing AI applications. It provides a comprehensive approach to verifying and enriching GenAI model output using both semantic and vector capabilities for Retrieval Augmented Generation.
PRGS Offers Positive Q3 Guidance
For the third quarter of 2024, Progress Software expects revenues between $174 million and $178 million, and non-GAAP earnings are expected to be in the range of $1.11-$1.15 per share.
The Zacks Consensus Estimate for third-quarter 2024 revenues is currently pegged at $175.8 million, suggesting a 0.02% decrease over the figure reported in the year-ago quarter.
The consensus mark for earnings is currently pegged at $1.14 per share for the third quarter of 2024, suggesting 5.6% growth over the figure reported in the year-ago quarter. The figure has been unchanged over the past 30 days.
Zacks Rank & Valuation
Progress Software currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise to hold off for a more favorable entry point in the stock.
Its Value Score of C suggests a stretched valuation at this moment.
Top-Ranked Stock Picks
SAP (SAP - Free Report) , Oracle (ORCL - Free Report) , and Adobe (ADBE - Free Report) are some better-ranked stocks in the same industry. Each of the stocks currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term earnings growth rate for SAP, Oracle, and Adobe is currently pegged at 10.7%, 11.02%, and 13.04%, respectively.