PEGA - Pegasystems Message Board

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Technology Stocks : PEGA - Pegasystems

PEGA 61.03

-3.1%

Nov 4 3:59 PM EST

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To: Trader Dave who wrote (379)	4/2/1998 11:30:00 PM
From: Clam Clam	Read Replies (2) of 504

Listened in. I thought I heard them hint that their non-perpetual license philosophy might not be sustainable. Kind of throws a wrench into their accounting. I don't think the stock deserves to be higher than the 'teens right now but I was actually kind of surprised (on the upside) with the top-line and the A/R. I still don't think its clear what exactly happened with First Data and Coopers & Lybrand and I don't feel 100% comfortable that this was necessarily the last restatement of results. Moreover, even with 1) 18+% NET margins 2) no cash outflow to any of their customers and 3)flat A/R, they STILL weren't cash flow positive in the quarter. The CFO calling for help was classic. I have no idea what the expectation of investors that own this stock were going in so it's anybody's guess where this thing opens but whoever believes that Goldman's estimate of $.73 for 1998 should be used to value this stock (given the obvious inability for this company to guide Wall Street expectations) is living in fantasyland. How's this for a thumb in the air stab at some estimates for 1998: 1) Goldman's previous revenue estimate of $93.2mm minus 10%. 2) 32% operating margins for the year (same) 3) ZERO credit for the accounting fluff (license interest income) Yields about $.53 after tax + another $.05 after tax of interest income. That is $.58 but I would give it a discount just to be conservative. That gets you about $.50 to $.55. Give it a 45x multiple and that gets you a low $20's stock price target. That is about where it is so I would say it should trade in the mid-teens right now. As a cross-check, $90mm is about 1/2 the amount VNTV will do this year. PEGA also has about 1/2 the sales reps VNTV has. Therefore, PEGA should have about 1/2 the market cap of VNTV. Seeing as I think VNTV is a $50-55 stock in a year, I think that a $25 12-month target on PEGA seems fair. What do you think, Dave? Anybody want to comment on what they heard regarding the perpetual vs. 5-year license argument?

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