Manhattan Associates is the IBD Stock of the Day for Wednesday. Shares of the software maker are rising toward a handle buy point.
Founded in 1990, Atlanta-based Manhattan Associates develops software tools for supply chains, including warehouse management. The stock has gained roughly 40% this year, outpacing a 27% gain for the S&P 500. That's after shares jumped by 77% in 2023, helped by momentum in the company's shift to subscription-based software sales.
On the stock market today, Manhattan Associates stock rose 1% to close at 300.67. Shares are breaking a four-day downtrend to approach a 306.63 handle buy point.
Enterprise technology firms have rallied in recent weeks after strong earnings reports from a list of companies that includes Salesforce and Snowflake. The iShares Expanded Tech-Software ETF, which holds shares of more than 100 enterprise software players, jumped 15% in November, its best monthly gain since November 2023. IGV is ahead 3% so far this month.
Manhattan Associates Stock Bouncing Back
Manhattan Associates, meanwhile, is still working back to highs reached in mid-October. The stock tumbled 7% the day after the company reported third-quarter earnings on Oct. 22.
Adjusted earnings per share increased 29% year-over-year for the September-ended quarter, while sales rose 12% to $266.7 million. Both top- and bottom-line metrics exceeded consensus expectations, but analysts noted the company's guidance prompted some investor concern.
"We believe guidance is conservative, (the company's) beat and raise dynamics intact and are incrementally confident in sustained strong cloud, earnings and free-cash-flow compounding growth," wrote Truist Securities analyst Terry Tillman in an Oct. 22 client note. "Based on the lower revenue outlook for fiscal year 2025 and after-hours action, we expect shares to trade off tomorrow and would recommend buying on weakness."
Tillman rates the stock a buy.
Manhattan Associates' adjusted earnings are projected to grow 23% this year while sales grow 12%, according to FactSet analyst consensus totals. Earnings grew 35% and sales jumped 21% in 2023.
That's a factor to watch for Manhattan Associates. Revenue growth is projected by analysts to slow against tougher comparisons. Analysts project sales of $253.6 million for the company's December-ending fourth quarter. That would represent 6% year-over-year sales growth, after sales rose 12%, 14.8%, 15.2% and 20% in the previous four quarters.
Wall Street Bullish On Manhattan Associates
However, growth remains strong for the cloud subscription business that investors tend to focus on. Cloud subscription revenue is seen rising 25% to $89.5 million in the company's Q4, according to FactSet.
Piper Sandler analyst Quinton Gabrielli initiated coverage of Manhattan Associates with a positive overweight rating last month. He noted that the company is roughly seven years into a shift to the cloud, a process that can occasionally be bumpy for software companies.
"The supply chain space is seeing multiple secular tailwinds accelerating market growth, and Manhattan's expertise in the most complex environments is differentiating," Gabrielli wrote to clients on Nov. 24. "While cloud transitions can be messy, Manhattan is through the 'worst' of the revenue headwinds, creating increased visibility and margin improvement moving forward, while still offering a more than $3 billion migration opportunity."
He set a price target of 326 for Manhattan Associates stock with the report.
Analysts are mostly bullish on the stock. There are 11 analysts following Manhattan Associates, according to FactSet. Nine of those analysts hold a buy or equivalent rating, while the other two hold a neutral rating.
Technical Ratings
On Manhattan Associates weekly stock chart, MarketSurge shows a flat-base pattern with a buy point of 307.50, representing a high reached in October. A handle formation offers a lower entry at 306.63.
Manhattan Associates' gain this year has been helped by two breakouts, the first in February and second in August.
Manhattan Associates stock holds a stellar IBD Composite Rating of 98 out of a best-possible 99, according to IBD Stock Checkup. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks typically have a Composite Rating of 90 or better.
Further, Manhattan Associates stock has an Accumulation/Distribution Rating of B+. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The stock's current rating indicates more funds are buying than selling.
