Anaplan (PLAN) seems to have its growth story planned well. The cloud-based software provider is witnessing strong demand after posting impressive second-quarter results. I am bullish on the company, due to its strong leadership, and aggressive flow of product innovation.
Revenues grew 35.5% year-over-year in Q2, driven by solid customer growth and higher bookings from existing customers. However, the adjusted loss of $0.09 per share was wider than the year-ago quarter due, to increased expenses on product innovations. (See Anaplan stock charts on TipRanks)
Following the earnings call, Needham analysts led by Scott Berg held a virtual non-deal roadshow with Anaplan CEO Frank Calderoni and CFO Vikas Mehta, to gain more insights into the developments within the company.
The topic of the high-demand environment for Anaplan’s solutions dominated the conversation.
Quick Adaptability a Key to Success
Berg noted that apart from industries like travel and hospitality, which continue to remain under pandemic-led pressures, other addressable markets have shown impressive demand recovery.
The analyst believes that demand in Anaplan’s retail vertical has caught up faster than other impacted verticals because the company could quickly adjust its operating strategies to suit the new normal. Notably, Anaplan reports Financial Services, Retail, Healthcare, High Tech, and Consumer Packaged Goods to be its top five end markets.
A strong pipeline of products and solutions for the rest of this calendar year reflects an improvement in sales coverage. The analyst is confident that Anaplan is suitably positioned to capture demand more effectively thanks to its greater account coverage, as the hospitality, travel, and leisure industries get back on their feet.
Product Innovations Enhance Competitive Position
Anaplan has used the pandemic-led changes to its advantage. The company continued to innovate on its products, coming up with compelling solutions for industries trying to keep up with the changing environment.
Berg expects the company to continue building its supply chain platform with more use cases, a capability that its chief competitors, namely Adaptive Planning (formerly Adaptive Insights) and OneStream Software, cannot compete effectively with.
Moreover, the company leverages predictive modeling with Artificial Intelligence and Machine Learning technology. This capability has strengthened with the internally developed Plan IQ technology and the acquisition of customer engagement platform provider Mintigo. Encouraged by the solid growth potential of the Connected Planning market, the analyst believes that Anaplan’s foothold in this area positions it well to benefit immensely from its prospects.
According to Berg, Anaplan has an upper hand among its competitors, on the back of its legacy solutions, point solutions, and excel-based workflows.
Expanding Partner Roster
Partner growth is another area in which Anaplan is excelling. Berg notes that more than 50% of customer growth, including expansion of deals with existing customers, is influenced by partners. Collaborations with the likes of Alphabet’s (GOOGL) Google Cloud and Amazon’s (AMZN) AWS were among the key developments in Q2.
“Google Cloud Partnership is Anaplan’s first public cloud offering, and we believe offering deployments on the two largest public Cloud deployments provides another piece of the puzzle to drive new business,” noted Berg.
Experts’ Take on the Stock
The discussion with the management solidified Berg’s confidence in the company’s growth prospects. He reiterated a Buy rating on the company, with a price target of $95.
The Wall Street consensus seems to share Berg’s sentiments on Anaplan, with a Strong Buy rating, based on 15 Buys and two Holds. The average Anaplan price target of $83.13 implies 26% upside potential from current levels.
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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
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