Pacific Crest Analysts See More Partnerships Coming For MindBody

In a recent report Pacific Crest analysts Brendan Barnicle and Trevor Upton reiterated an Overweight rating and $19.00 price target on shares of MindBody. So, what is behind their bullishness?

Below are the four main points of their investment thesis.

1. Rising TAM

When the company went public earlier this year, the total addressable market (TAM) was estimated at $15 billion.

However, since the second quarter of the year, the TAM has risen on the back of “increased adoption of its platform, as well as new partnerships, like LendingClub,” the analysts stated.

“Investors are still skeptical about the TAM because MINDBODY serves a market that has not been served by software and SaaS in the past. MINDBODY is also seeing ongoing increases in ARPS, which should drive market expansion.”

Related Link: Can MINDBODY Use Its IPO To Overcome Its Increasing Losses?

2. Partnerships Ahead

More partnerships seem underway as MindBody becomes a platform for small and medium business services companies.

According to the report, “Partners value MINDBODY's customer base and the high customer retention rate.”

3. No Trade Off Ahead, Commitment To High Growth/Profitability

Management seems committed to both high growth and profitability, and sees no need for a trade off. While Pacific Crest models profitability in 2018, they expect the company to achieve it faster than expected.

Furthermore, the note supplemented, “Management reiterated that it has twice as much cash as it needs to reach profitability.”

4. Macro Environment's Impact

The experts do not envision the macro environment having any material impact on the third and fourth quarter of the year, given that MindBody’s exposure to emerging market is very limited at the time.

Even further, the company has proven its ability to grow through recessions in the past.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

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