Duck Creek Technologies (NASDAQ:DCT) stock has slumped over 60% year-to-date. Macro weakness, normalization in demand, and overall selling in tech stocks weighed on DCT stock. However, improved deal activity, secular tailwinds, and low valuation make Duck Creek stock attractive at current levels.
Fundamentals Remain Strong
Duck Creek offers a SaaS cloud platform to the property and casualty (P&C) insurance sector and has witnessed a solid improvement in deal activity in Q4, led by increased customer demand.
Its CEO, Michael Jackowski, said, “Duck Creek’s fourth quarter performance was highlighted by improved deal activity as customer demand and interest in modernizing their core systems to Duck Creek OnDemand, our industry-leading SaaS cloud platform, remained strong.”
Thanks to strong demand, DCT delivered better-than-expected Q4 financials. Its revenues of $80.7 jumped 14% year-over-year and surpassed Street’s estimates by $7 million. Moreover, its adjusted earnings of $0.03 a share came ahead of the analysts’ estimate of $0.02.
In response to the Q4 beat, William Blair analyst Dylan Becker stated, “Strength in the quarter was largely attributable to management’s ability to close several of the deals in prior quarters that had been pushed out previously as well as steady pipeline momentum of core system modernization projects.”
Becker is bullish about DCT stock and expects it to benefit from “durable subscription growth and margin expansion as carriers continue to prioritize their core system investments.”
The analyst finds DCT’s valuation attractive compared to peers and sees the discount as unwarranted.
Is DCT Stock a buy?
DCT stock commands a Strong Buy consensus rating on TipRanks based on four Buys and one Hold recommendation. The ongoing modernization of IT systems in the P&C insurance industry provides a solid foundation for long-term growth.
Meanwhile, its average price target of $14.60, implies 22.2% upside potential over the next 12 months.
Along with analysts, DCT stock has a positive signal from hedge funds. TipRanks’ data shows that hedge funds bought 2.2M Duck Creek stock last quarter. Meanwhile, Duck Creek stock has a Neutral Smart Score of 7 out of 10 on TipRanks.
