MuleSoft Could Post Several Quarterly Beats, Analyst Says

Canaccord Genuity said in a note it believes Mulesoft Inc (NYSE: MULE) will post several at least somewhat better-than-expected consensus expectation quarters. If that is the case, the firm said its valuation is not as expensive as it appears.

The firm thinks the stock could outperform the overall market and probably, the software sector.

As such, the firm upgraded shares of MuleSoft from Buy to Hold and raised its price target from $24 to $29, assuming modest multiple compression over the next 12 months.

At time of writing, shares of MuleSoft were rallying 2.59 percent to $23.77.

Analysts Richard Davis and David Hynes Jr. noted that MuleSoft stock is roughly about 20 percent off both its high and low since its IPO. Therefore, the analysts said this is not a bottom tick.

Additionally, the analysts said independent data they have been collecting since the IPO, support a much stronger conviction in favor of the broad fundamental reason that MuleSoft stock is worthy of investor consideration.

See also: Look For MuleSoft To Kick Into Growth Mode In 2017

Canaccord Genuity said it sees enterprise applications disaggregating previously monolithic architectures into cloud-based micro-services. This architectural change, according to the firm, will allow companies and organizations configure a set of features and functions that best suits their workflows and needs.

The firm said a scalable, secure, flexible API layer is fundamental to this trend and that MuleSoft looks best positioned to deliver on this theme.

Longer term, the firm said it is providing a scenario in which the company can deliver a high-teens return on investment over a four-year period based on upside/bullish forecasts.

"We absolutely are not saying that this stock is anything close to risk free, but we do believe it is much more likely than not that MULE shares will outperform," the firm said, giving its rationale for the upgrade of the rating on the shares of MuleSoft.