Good Story, Bad Entry Point: Barclays Is Equal Weight On Appian

Analysts at Barclays initiated coverage of Appian Corp (NASDAQ: APPN), a SMID-cap provider of a software development platform that allows organizations to develop applications, with an Equal-Weight rating and $19 price target.

Barclays' Raimo Lenschow commented in a research report that while Appian boasts a compelling product offering in a market that is valued at $24 billion, the stock's valuation is reason enough to remain sidelined.

Appian services clients within business process management, case management and mobile app development. The company is also in a sweet-spot between a fast and-easy-to-use solutions provider and a more complex and powerful solutions provider that gives the company "ample runway" to gain share, Lenschow noted (see Lenschow's track record).

In fact, the company's decision to shift away from Appian's lower-growth professional services business (47 percent of revenue) and focus on a subscription revenue model will contribute to a better growth rate.

But Appian's stock has already gained 22 percent since its initial public offering in late May while the S&P 500 index returned just 1 percent over the same time period. This indicates investors "clearly have an appetite" for the stock, but a 5.8x EV/FY 2018 sales multiple implies shares are already trading in line with its SaaS peers.

"We think Appian has a compelling story but valuation keeps us sidelined for now," the analyst emphasized.

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