RBC Capital Markets analyst Matthew Hedberg lowered his price target on shares of Parametric Technology (NASDAQ:PMTC) to $25 from $30, while maintaining "Outperform" rating.
After the company's cut to Q2 guidance, the brokerage reduced its 2012 EPS estimate to $1.50 on revenue of $1.29 billion from $1.60 on revenue of $1.32 billion and its 2013 estimate to $1.81 on revenue of $1.43 billion from $1.92 on revenue of $1.47 billion.
The company lowered its Q2 adjusted revenue outlook to about $300 million, versus consensus estimate of $314.7 million, from previous forecast of $305 million to $320 million. The company also cut its Q2 EPS guidance to range of $0.26 to $0.28, versus consensus estimate of $0.34, from previous estimate of $0.32 to $0.36.
PTC negatively preannounced Q2 results largely due to a $10 million-plus deal in Europe that slipped and weaker-than-expected North American results. Management remains cautious on their short-term outlook due to PTC-specific execution risks, and refrained from updating fiscal 2012 guidance as they unpack Q2 results.
That said the company remains confident in their end-market demand and reiterated fiscal 2015 targets offered last quarter. While it can be easy to shoot first and ask questions later, Hedberg maintained his rating as he still believes PTC should benefit from multi-year trends including a product cycle refresh and recovering global markets.
A European deal worth more than $10 million in license revenue slipped in the last week of the quarter as a result of a change of control at the customer. PTC will continue to pursue the deal, but believes it may be at risk. Meanwhile, North American had execution related softness as a number of expected $1 million-plus transactions failed to close, but should return.
The company feels it's too early to know exactly what happened, but the analyst believes they may have pulled some Q2 deals into prior quarters that were not back-filled. As a positive, PTC recently increased sales capacity 25% and expects to see productivity benefits in the second half of 2012.
Going forward, Hedberg believes management will take a more conservative approach to forecasting large deals while implementing salesforce.com to more effectively manage pipelines.
Finally the analyst believes there is a good chance management may reduce non-revenue generating headcount further (beyond the previously announced 3% or 185 employees) as they focus on profitability.
Hedberg believes PTC has the opportunity to grow revenue north of 10%-plus annually over the next several years as it continues to address its market opportunity by launching new products such as Creo, Windchill 10, and Arbortext, winning competitive domino accounts, cross/up-selling existing customers, and adding new organic wins.
PMTC closed Monday's regular session down 2.33% at $20.96.