Pegasystems flies on AI decision and workflow automation platform

Pegasystems Inc. NASDAQ: PEGA is an enterprise software company specializing in helping companies unlock business-transforming outcomes with its suite of cloud-based tools on its Pega Platform. Its artificial (AI) decisioning and workflow automation platforms specialize in customer relationship management (CRM) and business process management (BPM) to help enterprises automate, streamline, and optimize operation efficiencies. The company has competitors in the business services sector, notably in the CRM and BPM segments, including Salesforce Inc. NYSE: CRM, ServiceNow Inc. NYSE: NOW, and UiPath Inc. NYSE: PATH.

Pega Platform features

The Pega Platform specializes in optimizing customer engagements and workflows with its always-on centralized AI-powered decisioning engines. Its platform contains four role-based authoring solutions that can promptly build applications through a visually driven process requiring no coding. AI-powered Pega Process Mining analyzes processes to root out inefficiencies and uncover optimization opportunities for business users and data scientists.

Pega Process AI infuses automation with workflows, helping to monitor and optimize all process touchpoints. Its built-in model development monitoring and governance helps improve and streamline collaboration between app developers and data scientists. Many of the tools provide predictive functions and provide actionable insights. Pega Gen AI is the first generative AI for enterprises, enabling AI-generated low code to transform ideas into enterprise apps. Check out the sector heatmap on MarketBeat.

Knocking it out of the park

On February 14, 2024, Pegasystems reported Q4 2023 EPS of $1.77, crushing consensus analyst estimates of 99 cents by 78 cents. Revenues surged 19.6% YoY to $474.23 million, beating analyst estimates of $413.79 million. Pega generated double-digit annual contract value (ACV) growth and record cash flow in the quarter exceeding $200 million. Pega Cloud's gross margins surged to 74% for 2023.

Double-digit segment growth

Literally all its segments, with the exception of Perpetual license, experienced double-digit growth. Subscription services saw a 43% YoY growth to $206.99 million, while Subscription licenses had a 44% YoY growth in the quarter to $207.56 million. Maintenance and Consulting saw 18% and 12% YoY growth, respectively.

Raising guidance

Pegasystems provided upside guidance for full-year 2024 EPS of $2.75 versus $2.45 consensus estimates. Revenues are expected to be around $1.5 billion versus $1.48 billion. The company forecasts ACV to grow 11% and expects $365 million in cash from operating activities and a free cash flow of $350 million.

AI is on the mind of every CEO

Pega CEO and Founder Alan Trefler said he met with its most senior clients in Davos for the annual World Economic Forum meeting. The topic of AI dominated nearly every conversation. Trefler commented, "And our enterprise AI decisioning and workflow automation platform enables clients to unlock business transforming outcomes, with real-time optimization and continuous improvement. You can find great case studies on our website that explain how our clients are using the software to, one, improve customer engagement by customizing conversations in real-time and at scale."

Case Studies

Trefler provided examples like how Wells Fargo and Co. NYSE: WFC uses their customer decision hub to provide relevant and targeted responses to billions of monthly customer interactions. Aflac Inc. NYSE: AFL attests to how Pegasystems is simplifying and automating the processing of thousands of emails to improve customer and employee satisfaction. Lloyds of London uses automation with intelligence to resolve fraud and dispute claims more promptly and effectively while on the phone with the client.

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Wedbush Outperform rating

Wedbush maintained its Outperform rating on Pegasystems share. Analysts acknowledge that Pegasystems had a robust Q4 2023 driven by the success of Pega Cloud and generative AI. The strong guidance, which included $350 million free cash flow, was impressive, considering the highest whisper number was $275 million. More customers are switching to Pega Cloud and integrating generative AI into the data. Analysts expect gross margins to exceed 80% with further automation and an increase in Pega Cloud.

Pegasystems analyst ratings and price targets are at MarketBeat. Pegasystem peers and competitor stocks can be found with the MarketBeat stock screener.

Daily ascending triangle pattern

The daily candlestick chart on PEBA illustrates an ascending triangle pattern. The ascending trend line formed at $44.07 on January 4, 2024. It triggered a daily market structure low (MSL) breakout through the $45.41 trigger. The ascending trendline supported higher lows on pullbacks heading towards the $50.84 flat-top upper resistance trendline, which doubles as a gap-fill price level. PEGA gapped to $60.00 on its blowout Q4 2023 earnings report the following day as shares surged to $69.26 before pulling back to $64.88, forming a daily bullish harami candle. The daily relative strength index (RSI) surged through the 70-band as it formed a sharp peak, falling back towards the 70-band. Pullback support levels are at $60.00, $53.97, $50.84 and $47.82.