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Understanding PTC’s Newly Added Risk Factors

Massachusetts-based PTC (PTC) provides software solutions for product development and management. The company has been in business since 1985, and acquisitions have been part of its growth strategy. In 2021, it acquired product lifecycle management platform Arena Solutions and combined it with Onshape, a business it acquired in 2019.

With this in mind, let us look at the company’s recent financial results and understand its newly added risk factors. (See Analysts’ Top Stocks on TipRanks)

Q4 Financial Results

PTC reported revenue of $481 million for the fourth-quarter ended September 30, which exceeded the consensus estimate of $429.6 million. Revenue stood at $391 million in the same quarter last year. It posted adjusted earnings of $1.10 per share, which surpassed the consensus estimate of $0.68 per share. It had reported adjusted earnings of $0.78 per share in the same quarter last year

For Fiscal Year 2022, the company anticipates revenue in the band of $1.85 billion to $1.98 billion, compared to $1.81 billion in Fiscal Year 2021. The consensus estimate for the same stands at $1.7 billion.

PTC returned $30 million to shareholders through stock repurchases in the fourth quarter and ended the quarter with $327 million in cash. The company has $1.4 billion of debt. (See PTC stock charts on TipRanks).

Risk Factors

According to the new TipRanks’ Risk Factors tool, PTC’s main risk category is the Finance and Corporate, which accounts for 54% of the total 26 risks identified for the stock. The company recently updated its profile with two new risks.

PTC owns a stake in Matterport (MTTR) stock and the investment was valued at $78 million at the end of the fourth quarter. The company informs investors that investments in public companies expose it to various risks, including share price volatility and liquidity challenges. The company says that it is required to present the fair value of the stock investments on its balance sheet at the end of every reporting period. It notes that volatility in the stock market and changes in economic conditions can cause the fair value to fluctuate. It cautions that such fluctuations could have a material adverse impact on its reported earnings when the value of the investments declines.

Under the Production risk category, PTC tells investors that it relies on a number of third-party technology providers to deliver its products to customers. It cautions that its customers may experience service disruptions or outages because of problems at the third-party providers. Such challenges may harm PTC’s reputation, drive up expenses, and adversely impact the company’s business.

The Finance and Corporate risk factor’s sector average is at 40%, compared to PTC’s 54%. Shares of the company have declined about 8% year-to-date.

Analysts’ Take

Following PTC’s fourth-quarter earnings report, Loop Capital analyst Yun Kim reiterated a Buy rating on the stock but lowered the price target to $160 from $175. Kim’s reduced price target suggests 45.83% upside potential.

Consensus among analysts is a Strong Buy based on 8 Buys and 2 Holds. The average PTC price target of $158.56 implies 44.51% upside potential to current levels.

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