On Friday, Piper Sandler, a financial services firm, raised its price target on shares of Tyler Technologies (NYSE: NYSE:TYL) to $625 from the previous target of $529. The firm also reaffirmed its Overweight rating on the stock.
The adjustment comes after an evaluation of Tyler Tech's second-quarter results, which highlighted the company's ongoing transition to a subscription-based model and the growth of its Annual Recurring Revenue (ARR) due to an increase in new subscription services.
Tyler Technologies has seen a significant shift in its business towards Software as a Service (SaaS), with over 95% of its year-to-date mix now in this model.
Despite this pivot, the company's maintenance revenue, which includes renewal activities and price increases, has not yet significantly impacted SaaS revenue growth. Analysts project that maintenance revenue will only see a low-single-digit decline in 2024, and maintenance bookings have increased by 4% year-to-date.
The company's performance thus far in the year has been noteworthy, with its stock value increasing by more than 38% year-to-date. This rise in share price brings Tyler Technologies under closer observation by investors and market analysts.
Piper Sandler's positive outlook is based on the expectation that Tyler Tech is on track to meet its long-term objectives sooner than anticipated. These goals include reaching $1.8 billion in SaaS revenue, $1 billion in free cash flow (FCF), and migrating 75-85% of its customer base to the SaaS model.
The analyst from Piper Sandler expressed confidence in Tyler Technologies' direction and potential, stating, "With shares up >38% YTD, we acknowledge shares are subject to much higher scrutiny, but at current trend we believe Tyler is set to early achieve its LT objectives: $1.8B of SaaS, $1B of FCF, and 75-85% of customer base migrated to SaaS.
Raising PT to $625." This statement emphasizes the firm's belief in the strength of Tyler Tech's subscription transition and its impact on the company's financial targets.
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