Anaplan, Inc (NYSE:PLAN) Accelerates To New Highs

Anaplan, Inc; A Small-Cap Tech Growth Story

Anaplan, Inc (NYSE:PLAN) is emerging as a small-cap growth story for 2021 and beyond. The company operates a cloud-based SaaS platform that connects disparate segments of business for planning purposes. This may not sound like much but when it comes to connected planning there’s a hurdle not easily overcome. Digital technology relies on databases and not all databases are the same. The ones favored by accountants may not be used by salesmen, supply chain managers, or human resources offices; Anaplan makes it easy and business is good.

“We delivered a strong quarter as companies prioritize investments towards initiatives that drive incremental business value,” said Frank Calderoni, chief executive officer of Anaplan. “By using our Connected Planning platform, our customers stay ahead of their competition with the ability to adjust and adapt quickly to an everchanging environment.”

Anaplan, Inc Beats And Guides Higher

To be clear, Anaplan is still a pre-profit company but one that is on track for profitability before 2024. Sound like a long time, I know, but the company is expected to more than double in size in the interim, and the results suggest it will reach that point well ahead of the consensus estimate. In the 3rd quarter, revenue came in at $114.88 million. This is up 28.5% from last year, 10% from the prior quarter, and acceleration of YOY growth from 26% in the 2nd quarter to 28% in the 3rd. In terms of the analysts and Wall Street’s expectation, Anaplan beat by a full 500 basis points.

Revenue was driven by strength in the subscription services. Subscription revenue grew 31% to $104.7 million with a 25% increase in performance obligations. Moving down the report, the company was able to leverage the increase in revenue and drive a substantial improvement in margins. The adjusted operating margin came in at -5.3% to beat the company’s own guidance of -12.5% to -13.5%. This is important because the new guidance is calling for margins in that same range. On the bottom line, the adjusted EPS of -$0.05 beat by a nickel.

Looking forward, the company is expecting revenue to grow again in the 4th quarter and at a rate above the previous guidance. The new guidance is calling for $118.5 to $119.5 in gross revenue or about 3.25% sequentially and 20% annually vs the $118.4 consensus target. The slow-down in growth is a small worry but there are two mitigating factors. The first is that growth will very likely exceed guidance. The second is that comps are going to start getting tougher because the 4th quarter of 2019 was when revenue growth started to accelerate. The pace of YOY growth may slow but growth will still be strong.

The Analysts Are Chasing Anaplan

There are a surprising number of analysts covering Anaplan, about 20, and they are mostly bullish. Of them, there are 11 bulls and only a single bear but take that with a grain of salt. Most ratings are at least one quarter old and don’t reflect the acceleration in growth or newly offered guidance. The consensus target, for example, is 10% below the current price action which is far too low. The three most recent ratings were issued this month, the most recent one today, and they tell a different story. Those three include Deutsche Bank, have an average Outperform/Strong Buy rating, and a $75 consensus target or about 20% upside.

The 3Q earnings report has shares of Anaplan, Inc up 10% and trading at a new all-time high. The move sparked some profit-taking but the outlook and momentum are both bullish. With no earnings, it is hard to put a target on the stock but based on the technicals investors might expect another $5 to $10 of upside over the next two quarters.