Manhattan Associates is the IBD Stock of the Day as the maker of supply-chain management software becomes actionable. MANH stock has soared 66% thus far in 2023 as the company's shift to subscription-based software as a service gains momentum.
On the stock market today, MANH stock edged down marginally to 200.48.
Founded in 1990, Atlanta-based Manhattan Associates holds a 205.70 cup-with-handle buy point. It's actionable from breaking a downtrend in the handle.
Shares pulled back in late July and again in early September as some investors questioned future catalysts for MANH stock.
Manhattan Associates: GAAP Profitability
Meanwhile, the company's recent second-quarter earnings and revenue topped Wall Street targets. Unlike many software makers, Manhattan Associates is profitable on an unadjusted basis using generally accepted accounting principles, or GAAP. Second-quarter GAAP profit rose nearly 29% to 63 cents, topping estimates of 50 cents.
It's easier for companies to look profitable on an adjusted basis. Non-GAAP accounting allows companies to make adjustments to financial statements including one-time expenses, restructuring costs or other nonoperating items. Further, non-GAAP earnings do not include stock-based compensation, a major expense for some companies.
Also during the second quarter, Manhattan Associates' revenue rose 20% to $231 million, topping estimates of $216.7 million.
Cloud subscription revenue climbed 44% to $60.94 million, topping estimates of $59.32 million. Most of the revenue beat came from services and maintenance.
Seeing Revenue Accelerate
Importantly, the company has transitioned away from selling on-premise licensed software.
At Truist Securities, analyst Terry Tillman said in a recent note to clients: "We are confident in accelerating revenue growth as the company successfully transitions to a much higher proportion of cloud subscription revenue driven by an innovation cycle driving sales of supply chain, omnichannel and inventory-related solutions."
One bright spot in the company's second quarter was a financial metric called Remaining Performance Obligations, or RPO, Rosenblatt analyst Blair Abernathy said in a recent note. It's a sum of deferred revenue and backlog.
"As its established base of (Warehouse Management System) customers transition to its cloud-native Manhattan Active platform, RPO (mainly cloud subscriptions) is growing rapidly, up 38% year over year in Q2 to a record $1.2 billion," he said.
MANH Stock: Working On AI Initiatives
Like almost all software companies, Manhattan Associates is rushing to figure out how to integrate generative artificial intelligence tools into its platform. Generative AI "models" process "prompts," such as internet search queries, that describe what a user wants to get. Large language models require training data for specific tasks.
Generative AI technologies create text, images, video and computer programming code on their own.
On Manhattan Associates' second-quarter earnings call with analysts, Chief Executive Eddie Capel outlined the company's strategy on generative AI.
"Certainly we think it's got a ton of potential for sure," Capel said. "There is — just a little aside, I think all of us are wondering exactly how much this is going to cost. So we've got to think as we move forward with the practicalities of implementing generative AI, we've got to make sure that we keep our eye on the return on investment, both for internal usage and for our customers."
He added: "Today, we are doing real work and creating real proof of concepts."
Manhattan Associates Expands Into New Area
The company's core business is selling warehouse management system software. Also, Manhattan Associates sells order management system software, which handles the order fulfillment process.
In addition, a new line of business is point-of-sale software for retailers. Manhattan Associates has partnered with Alphabet's Google in this realm.
"We're particularly intrigued by the recent integration with Google Shopping, where Manhattan ActiveOmni customers will be able to show a guaranteed delivery date for Google Shopping customers," Raymond James analyst Brian Peterson said in a note.
He added: "This marks an example of supply chain visibility driving higher revenue conversion on the front-end, a dynamic that should also occur in-store with the company's (Point of Sale) offering."
MANH Stock Technical Ratings
MANH stock holds an IBD Composite Rating of 97 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. Also, the best growth stocks have a Composite Rating of 90 or better.
Further, MANH stock has an Accumulation/Distribution Rating of C-plus. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.
The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
