Barclays Kicks MuleSoft Coverage Off At Equal Weight Citing High Valuation

Mulesoft Inc MULE, being a leader in the next generation software integration market, enjoys healthy growth in spite of its increasing scale. “We are confident that growth can remain healthy given the last TAM [total addressable market],” Barclays’ Raimo Lenschow said in a report.

MuleSoft’s shares have surged 38 percent since its IPO a few weeks back, versus a decline of 1 percent in the S&P 500 over the same period. The stock’s valuation is the “highest in our universe,” limiting upside potential, Lenschow mentioned. He initiated coverage of the company with an Equal-Weight rating and a price target of $25.

Powerful Application Network

MuleSoft recorded 70 percent year-over-year revenue growth in 2016.

The promoting and managing standard APIs [application interfaces] that can be used by the company’s integration engine to create new connections. “An ever-increasing number of integrated applications and components creates a powerful network effect for MuleSoft that should enable healthy growth for years to come,” Lenschow wrote.

While the company estimates its TAM at $29 billion, Forester estimates the industry spending on integration solutions at $426 billion. Even if MuleSoft is able to capture a small percentage of this spend, it would be a large vendor, the analyst noted.

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