Model N Has Happy Customers And Good Pipeline Momentum, Oppenheimer Says

Conversations with customers indicate Model N Inc’s (NYSE: MODN) products are “entrenched, difficult to replace, and considered mission-critical,” according to Oppenheimer.

The Analyst

Oppenheimer’s Koji Ikeda maintains an Outperform rating on Model N, with the price target unchanged at $23.

The Thesis

The California-based software company hosted its annual customer conference, Rainmaker19, over March 18-20. The customers expressed they were extremely satisfied with Model N’s products, Ikeda said.

The company’s products are deeply integrated within their customers’ other systems, which makes it difficult to replace them.

Managing rebates is an extremely complex process for life sciences companies, and Model N is viewed as a leader in this vertical, with limited competition to its platform capabilities.

The company has a healthy pipeline of midmarket and enterprise prospects. There were several projects with prospective revenues ranging from around $500 million to $4 billion. Ikeda noted that all these prospects were using spreadsheets, which indicates that the end-market continues to be underpenetrated.

“We think odds are favorable that the business delivers good results in future quarterly reports, which should help narrow the valuation gap between MODN and its Tier-3 SaaS peers,” the analyst wrote in the note.

Price Action

Shares of Model N traded around $17.47 Tuesday afternoon.

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